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By Aiman Rahman Khan

Negotiable Instrument is a written instrument signed by the maker of the instrument that contains an unconditional promise or order to pay an exact sum of money on demand or at an exact future time, to a specific person, or to order, or to its bearer. According to s.13 of the Negotiable Act 1881, a Negotiable instrument can be a Promissory Note, a Bill of Exchange or a Cheque payable either to order or to the bearer. In Bangladesh, Chapter XXVI of the 1881 Act was substituted by Chapter XVII in the year 1994. The Act went through a final amendment in the year 2000. Although 134 Years old, the rules under the Act are timeless.

The previous chapter in the Negotiable Instrument Act 1881 (hereinafter N.I. ACT) dealt with ‘Notaries Public’ and s.138 had the title of ‘Power to appoint notaries public’. The amended version i.e, Chapter XVII of the Act deals with ‘On Penalties in case of dishonor of certain cheques for insufficiency of funds in the account’. Under this Chapter, s.138 is titled with ‘Dishonor of cheque for insufficiency etc., of funds in the account.

S.138 [1] states that Where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall without prejudice to any other provisions of this Act, be punished with imprisonment for a term which may extend to one year, or with fine which may extend to [thrice] the amount of the cheque or with both.

However, to avail these remedies, the holder of the cheque has to fulfill the following conditions:

  1. i) The cheque has been presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier
  2. ii) The payee or the holder in due course of the cheque, as the case may be, makes a demand for the payment of the stipulated amount of money by giving a notice, in writing, to the drawer of the cheque, within 30 days of the receipt of information by him from the bank regarding the return of the cheque as unpaid, and

iii) The drawer of such cheque fails to make the payment of the stipulated amount of money to the payee or, as the case may be, to the holder in due course of the cheque, within 30 days of the receipt of such notice.

People use cheques rather than carry around large amount of cash because of the reduced security risk. The definition of a cheque has been given in section 6 of the N.I. Act as a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand. A cheque maybe defined as an unconditional order in writing drawn on a banker signed by te drawer, requiring the banker to pay on demand a sum certain in money to or to the order of a specified person or to bearer and which does not order any act to be done. The section lays down few requirements such as the Condition for honor of cheque, sufficiency of fund, proper form, justification for not paying cheque and liability in case of dishonor of cheque.[1]

 Liability in case of dishonour of cheque:

A common incident in financial transaction is dishonor of cheques. When someone goes to a bank and presents a cheque issued by some other person or company, and if the bank refuses to pay money against the cheque due to insufficient fund in the account concerned, the person or company who issued the cheque commits an offence. The person commits this offense shall be punished with imprisonment for a term which may extend to one year, or with fine which may extend to thrice the amount of the cheque, or with both. Along with this remedy, the holder of the cheque shall retain his right to establish his claim through civil court if whole or any part of the value of the cheque remains unrealized.[2]

When a cheque is dishonored, the drawee bank immediately issues a ‘Cheque Return Memo’ to the banker of the payee mentioning the reason for non-payment.[3] According to many lawyers, this memo must be kept carefully preserved and claim can be made within 30 days of cheque dishonor. Such claim notice shall be served by personal delivery, by registered post with A/D or may be by publication in the widely circulated newspaper. If the drawer fails to pay within this period, then a cause of action will arise against him.

In such scenario, claimant must file a case before the Court of Judicial Magistrate of First Class within the next 30 days from the date when such cause of action arose. Maintaining the timeframe state above is the key to file action under the NI Act.[4]

The banker is liable for non-payment of cheque if, although there are insufficient funds of the customer in account, he has otherwise contracted to honour them e.g. by an arrangement with his customer for an overdraft or by direct promise to pay the cheque. The banker is also liable if he dishonors a cheque after misleading the customer into believing that there were sufficient funds to meet the cheque. (Holland v Manchester and Liverpool District Banking Co. 1909)[5].

 Order 37 of the Code of Civil Procedure 1908 deals with Recovery suit which can be used in Recovery of payment of Negotiable Instruments. This Order governs recovery of payment regarding dishonored cheques in a short time. These sort of cases are considered to be strict liability and the verdicts are given fast. Apart from the Order, a general moneysuit can be filed to recover the payment of a dishonored cheque. Under sections 406/420 of the Bangladesh Penal Code 1860, this can be claimed as Fraud and the claimant can file a petition at the Magistrate Court.[6]

Effectiveness and Application of s.138 in Present day:

There are significant problems in Bangladesh regarding identification of cheques. There are no cheque guaranty card, there is an identity crisis, the hassle of insufficient fund, closed accounts, stopped cheques, cheques issued with different signature and little knowledge about cheque dishonor. If a person transfers a signed cheque to someone, then he is bound to pay the amount at any cost, or else he will be liable under s.138 of the N.I.Act to pay triple the deserved amount and an imprisonment of 1 year for committing a civil offence. The Court observes a very strict mindset in terms of bounced or dishonor cheques. At the most serious civil cases, Warrants of Arrest are issued and bail becomes difficult to get.[7]

The operation of section 138 of the Act, 1881 cannot be obstructed or, in any way, circumvented by the mere fact of filing of a suit by the drawer of the dishonored cheque in civil Court whatever allegations may be in the plaint about the same and the relief prayed for therein, because such a device shall totally make the section itself nugatory[8]. In Habibur Rahman Howlader v State and another[9], the complainant served a legal notice within 15 days of the receipt of the information of return of cheques. So there is no valid ground for quashing the proceeding under s.138 of the Act.[10]

In Satya Harayan Poddar v State and another, it was seen that even though the case is premature and it was filed before the expiry of 15 days from the date of receipt of the notice, the proceeding is not liable to be quashed. In SM Anwar Hossain v Shafiul Alam (Chand) & Another[11], it was held that prosecution will arise on the failure to pay the amount within 15 days of the receipt of the notice of the complainant under clause (c) of s.138 of the N.I.Act. In Nurul Islam v State and another[12],it was held that the rule of law about the peremptory application of the special law in place of the general law for trial of an offense hardly applies when the offenses are distinct under the two laws.

The effectiveness of s.138 of N.I.Act 1881 in Bangladesh in recent times is significant. The banks are being more careful as to the knowledge of such crimes. The amendments in the Act made Cheque Dishonor a strict liability and thus the claims do not go unheard. Since the procedure to file a complaint is simple, the claimants are able to recover the amount. The N.I. Act together with the Code of Civil Procedure 1908 have provided remedy to many in Bangladesh.

Aiman Rahman Khan is currently pursuing his Master of Social Science with a major in Victimology and Restorative Justice from University of Dhaka.. He completed his LLB from University of London and LL.M from Eastern University, Bangladesh.


[1] Bhuiya M, ‘Bangladesh Laws on Banks and Banking’ (1994), Distributed by CKB & Co.

[2] An Article titled ‘Dealing with bank cheques lawfully’ published on January 29, 2014 by the ’Juris Desk’ of a Bangladeshi National daily ‘Dhaka Tribune’ (collected 21-12-15)

[3] An Article titled ‘Cheque Dishonoured: A step by step guide for legal recourse’ in the website

[4] An Article titled ‘Cheque Dishonour’ published on the Bangladeshi National daily ‘The Daily Star’, dated: March 17, 2015 (collected: 21-12-15)

[5] Bhuiya M, ‘Bangladesh Laws on Banks and Banking’ (1994), Distributed by CKB & Co.

[6] Rahman A, ‘Bouncekrita cheque er Salpa Samaya taka Adaya Mokaddama Aain’ (2001), Guardian Group Publication

[7] Rahman A, ‘Bouncekrita cheque er Salpa Samaya taka Adaya Mokaddama Aain’ (2001), Guardian Group Publication

[8] Judgment of Md. Abdul Wahhab Miah J in the case of Md.Arif-Uz-Zaman Vs. State and another, 2011, 40 CLC (AD) [5435]

[9] 53 DLR 403

[10] The Negotiable Instruments Act [XXIV of 1881], First Edition (2002), DLR

[11] 4 BLC (AD) 106

[12] 49 DLR 464