Worried About Dishonoured Cheques During Lockdown? Here Are The Updated Guidelines By Honourable Supreme Court

Cheque Payments

In the current scenario when we are rapidly moving towards digitalisation and cashless services, cheque payments are very common. However, in cheque payment, there is always a chance of default at the time of presentation of cheque at the Bank. To handle this situation we have the Negotiable Instrument Act, that declares default of a lawfully paid cheque, a criminal offence punishable with up to 2 years of imprisonment. Apart from that to ensure the credibility of these cheque payments, our parliament has brought many new amendments to make laws more stringent in “bounced cheque cases.”

In our routine life, we all deal in cheques on a regular basis. As vigilant citizens we must know all relevant provisions, also what is the effect of Lockdown upon these cases.

Bounced Cheque Cases

When any person defaults a cheque given by him to another person for his legally enforceable liability, he shall be deemed to have committed an offence under section 138 of the Negotiable Instrument Act. In layman’s language when any person makes his due payment by cheque, and the same has defaulted when presented at bank for the said amount, he has committed an offence. These offences are commonly known as “138. cases.” 

General provisions governing Cheque Bounce cases.

Sec138 Of the Negotiable Instrument Act declare cheque return case a criminal offence-

• punishable up to 2 years of imprisonment or 
• with fine which may extend to twice the amount of cheque 
• or both

This section provides certain conditions for applicability of it, which are as follow- 

• The cheque must be presented at the bank within a period of 3 months from the date on which it is drawn, or within the period of validity, whichever is earlier.

• The complainant must make a demand for the payment of the said amount by giving a notice in writing, to the drawer (person who issued the cheque) of the cheque within 30 days of the receipt of information regarding the return of the cheque as unpaid from the bank.

• Even after giving notice, if the drawer fails to make payment to the drawee (to whom the cheque was issued) within 15 days of the receipt of said notice. The drawer is deemed liable under sec.138 of NI Act.

• The above-mentioned notice gives the drawer 15 days period to make payment of the defaulted amount to the drawee, to avoid further legal consequences. Anyhow if the drawer fails to do the same, then a complaint can be registered against him under section 138 of the N.I. Act in the Court of Magistrate having jurisdiction for the same.

• As per Art. 142 of the N.I. Act on failure to make payment of the cheque amount by the drawer, the cause of action arises. Now drawee has to make a written complaint within one month of the date on which the cause of action arises. In simple language after the expiry of 15 days of giving notice, if drawer did not make the payment, then the drawee has one month period to make a complaint against him.

Lockdown Relaxations

                            <a href="https://www.freepik.com/photos/people">People photo created by freestockcenter - www.freepik.com</a>

From the above-mentioned provisions we can conclude that in dishonoured cheque’s case, a drawee/payee/complainant has to take action within prescribed time limits to establish the liability against the drawer. ( who issued the cheque)

Such as presenting cheque within 3 months, giving notice within  30 days of information regarding cheque return unpaid. All these limitation periods are a must. But as since 23rd March the whole nation is under lockdown due to coronavirus (COVID-19) pandemic.

In such circumstances, it is not possible for anyone to follow these limitations. Thus taking into consideration the effects of COVID-19 and resultant difficulties being faced by the lawyers and litigants, the Honourable Supreme Court through its order has extended all periods of limitations prescribed under section 138 of the Negotiable Instrument Act,881 with effect from 15.03.2020 to indefinite time ( till further order).

The Apex Court further elaborated the point that in a case where the period of limitations has expired after 15 March, then the period from 15 March to till the date on which lockdown is lifted, shall be extended for a period of 15 days after the lifting of lockdown.


In simple words  this means that if the period of limitation expires after the date of 15.03.2020, the period from 15.03.20 to till the date on which lockdown is lifted shall be extended for a period of 15 days after the lifting of the lockdown.

 Let’s understand it with some simple examples-

• “A” Buys a material of worth 5000 from “B” and makes payment by cheque. Further “B” presents that cheque at the bank on 1st of March 2020, and the same is dishonoured due to insufficient funds. Now “B” has a time period of 30 days to send a written notice to “A” for the same. In normal circumstances his period of limitation will expire on 30th of March, but as this period is during the lockdown & expires after 15th March. Now “B” can send notice to “A” till the expiry of 15 days after the lifting of lockdown. That means if suppose the lockdown is lifted on 1st of June, then he can send notice till 15 of June to “A”.

• Similarly, if “B” would have sent the written notice to “A” little bit earlier and the same is received to “A” on 10th of March. In normal circumstances, “A” had to deposit the amount in the bank by 25th March i.e. during the lockdown and after the date of 15.03.2020. But as per the new order, “A” can now repay the amount till after 15 days of lifting of the lockdown.

• Again if Notice is sent by “B” on 15th February 2020 for the dishonoured cheque to “A”. For which till the expiry of 15 days i.e. 2nd of March, A did not make payment. Hence the cause of action arises on the 2nd of March. Now “B” has one month period to make a written complaint, which will expire on 2nd April, i.e. during the lockdown, a date after 15.03.20. Hence as per this updated order “B” can make complainant against “A” till the expiry of 15 days after lifting of Lockdown in that area.

Hence dear reader in case you are facing any bounced cheque issue and are worried about these time limitation periods. Also if anyhow you were not aware of these facts and did not take any step, be relaxed, now you have enough time to take action.

Be vigilant about your rights. Be safe.