Important kinds of endorsements are given below:

1. Blank or general endorsement:

If the endorser signs his name only and does not specify the name of the
endorsee, the endorsement is said to be in blank Sec. 16(1). The effect of a
blank endorsement is to convert the order instrument into bearer instrument
(Sec. 54), which may be transferred merely by delivery.
2. Endorsement in full or special endorsement:
If the endorser, in addition to his signature, also adds a direction to pay the
amount mentioned in the instrument to, or to the order of, a specified person
the endorsement is said to be in full [Sec. 16(1)].
If, for example, A, the holder of a bill of exchange, wants to make an
endorsement in full to B, he would write thus: Pay to B or order, SdA4. After
such an endorsement it is only the endorsee, i.e., B, who is entitled to
receive the payment of the instrument and to further negotiate the
instrument by his endorsement.
A blank endorsement can easily be converted into an endorsement in full,
According to Section 49, the holder of a negotiable instrument endorsed in
blank may, without signing his own name, by writing above the endorsers
signature a direction to pay to any other person as endorsee, convert the
endorsement in blank into an endorsement in full; and since such holder does
not sign himself on the instrument he does not thereby incur the
responsibility of an endorser.
3. Partial Endorsement:
Section 56 provides that a negotiable instrument cannot be endorsed for a
part of the amount appearing to be due on the instrument. In other words, a
partial endorsement which transfers the rights to receive only a part
payment of the amount due on the instrument is invalid.
Such an endorsement has been declared invalid because it would subject the
prior parties to plurality of actions (one action by holder for part value and

another action by endorsee for part value) and will thus cause
inconvenience to them.
Moreover, it would also interfere with the free circulation of negotiable
instruments. It may be noted that an endorsement which purports to transfer
the instrument to two or more endorses separately, and not jointly is also
treated as partial endorsement and hence would be invalid.
Thus, where A holds a bill for Rs 2,000 and endorses it in favour of B for Rs
1,000 and in favour of C for the remaining Rs 1,000, the endorsement is
partial and invalid.
Section 56, however, further provides that where an instrument has been
paid in part, a note to that effect ma; be endorsed on the instrument and it
may then be negotiated for the balance.
Thus, if in the above illustration the acceptor has already paid Rs 1,000 to A,
the holder of the bill, A can then make an endorsement saying Pay B or
order Rs 1,000 being the unpaid residue of the bill. Such an endorsement
would be valid.
4. Restrictive endorsement:
Stating the effect of endorsement, Section 50 provides that the
endorsement of negotiable instrument followed by delivery transfers to the
endorsee the property herein with the right of further negotiation. However,
Section 50 permits restrictive endorsement.
An endorsement which, by express words, prohibits the endorsee from
further negotiating the instrument or restricts the endorsee to deal with his
instrument as directed by the endorser is called restrictive endorsement.
The endorsee under a restrictive endorsement gets all the rights of an
endorser except the right of further negotiation. In other words, such an
endorsement entitles the endorsee to receive the payment on due date and
sue the parties for it but he cannot further negotiate the instrument.
Illustrations:

(a) B, the holder of the bill, makes an endorsement on the bill saying Pay C
only. It is a restrictive endorsement as C cannot negotiate the bill further.2
(b) B, the holder of the bill, makes an indorsement on the bill, saying Pay C
for my use or Pay C or order for the account of B. In either case there is a
restrictive endorsement as the right of further negotiation by C has been
excluded thereby.
The person liable on the hill must pay by drawing a cheque in the name of
the holder (or the endorser) B. If he makes the payment to C on Cs own
account, he will still be liable to B, the endorser; Hence C cannot endorse
the bill further in his own name.
5. Conditional endorsement:
If the endorser of a negotiable instrument, by express words in the
endorsement, makes his liability, dependent on the happening of a specified
event, although such event may never happen, such endorsement is called a
conditional endorsement (Sec. 52).
The law permits a conditional endorsement and therefore it does not in any
way affect the negotiability of the instrument. Thus, endorsements can
validly be made in the following terms:
(i) Pay B or order on his marriage;
(ii) Pay B on the arrival of Pearless ship at Bombay.
In the case of a conditional endorsement the liability of the endorser would
arise only upon the happening of the event specified. But the endorsee can
sue other prior parties, e.g., the maker, acceptor, etc., if the instrument is
not duly met at maturity, even though the specified event did not happen.
6. Sans recourse endorsement (Sec. 52):
When the endorser expressly excludes his own liability on the negotiable
instrument to the endorsee or any subsequent holder in case of dishonour of
the instrument, the endorsement is known as sans recourse endorsement.

Such an endorsement is generally made by adding the words sans recourse

or without recourse. Thus, Pay X or order sans recourse or Pay X without
recourse to me or Pay X or order at his own risk is examples of this type
of endorsement.
7. Facultative endorsement:
When the endorser expressly gives up some of his rights under the
negotiable instrument, the endorsement is called a facultative
endorsement. Thus, Pay X or order, notice of dishonour waived is a
facultative endorsement.
As a result of such an endorsement the endorsee is relieved of his duty to
give notice of dishonour to the endorser and the latter remains liable to the
endorsee for the non-payment of the instrument, even though no notice of
dishonour has been given to him.

Introduction:
A negotiable instrument may be transferred by negotiation. (i) Negotiation
can be effected by mere delivery if the instrument is a bearer one. (ii) By
endorsement and delivery in case it is an order instrument. An order
instrument means instrument payable to a specified person or to the order of
that specified person. If an instrument payable to order is transferred
without endorsement, it is merely assigned and the holder thereof is not
entitled to the rights of a holder in due course.
Meaning of Endorsement:
An endorsement is the mode of negotiating a negotiable instrument. A
negotiable instrument payable otherwise than to a bearer can be negotiated
only by endorsement and delivery. An endorsement, according to sec. 15 of
the NI Act is when the maker or holder of a negotiable instrument signs the
same, otherwise than as such marker. For the purpose of negotiation on the
back or face thereof or on a slip of paper annexed thereto, he is said to

endorse the same and is called the endorser. The person to whom the
instrument is endorsed is called the endorsee.
The word endorsement is said to have been derived from Latin en means
upon and dorsum meaning the back. Thus usually the endorsement is on
the back of the instrument though it may be even on the face of it. Where no
space is left on the instrument, the endorsement may be made on a slip of
paper attached to it. This attached slip of paper is called Allonge.
Essentials of a Valid Endorsement:
An endorsement in order to operate as mode of negotiation must comply
with the following conditions, namely:
1. It must be written on the instrument itself and be signed by the endorser.
The simple signature of the endorser, without additional words, is sufficient.
An endorsement written on an allonge is deemed to be written on the
instrument itself.
2. The endorsement must be of the entire instrument. A partial endorsement,
that is to say, an endorsement, which purports to transfer to the endorsee a
part only of the amount payable, or which purports to transfer the instrument
to two or more endorsees severally (i.e. separately), does not operate as a
negotiation of the instrument.
3. Where a negotiable instrument is payable to the order of two or more
payees or endorsees who are not partners, all must endorse unless the one
endorsee has authority to endorse for the others.
4. Wherein a negotiable instrument payable to order, the payee or endorsee
is wrongly designated or his name is misspelt, he should sign the instrument
in the same manner as given in the instrument. Though, he may add, if he
thinks fit, his proper signature.
5. Where there are two or more endorsements on an instrument, each
endorsement is deemed to have been made in the order in which it appears
on the instrument, until contrary is provided.
6. An endorsement may be made in blank or special. It may also be
restrictive.
Types of Endorsement:
According to the N.I. Act, 1881 endorsement may take any of the following
forms:
1. Endorsement in blank or general endorsement.

2.
3.
4.
5.

Endorsement in full or special endorsement.

Restrictive endorsement.
Partial endorsement.
Conditional endorsement.

1. Endorsement in Blank or General Endorsement:

In case of an endorsement in blank, the payee or endorser does not specify
an endorsee and he simply signs his name (S. 16 NIA).
2. Endorsement in Full or Special Endorsement:
When the payee or endorser specifies the person to whom or to whose order
the instrument is to be paid, the endorsement is called special endorsement
or endorsement in full. The specified person i.e. the endorsee then becomes
the payee of the instrument.
3. Restrictive Endorsement:
An endorsement is restrictive when it prohibits further negotiation of a
negotiable instrument. Sec. 50 of the NI Act 1881states. The endorsement
may, by express words, restrict of exclude the right to negotiable or pay
constitute the endorsee an agent to endorse the instrument or to receive its
contents for the endorser or for some other specified person.
For example, if B endorses an instrument payable to barer as follows, the
right of C to further negotiate is excluded
Pay the contents to C only
Pay C for my use
4. Partial Endorsement:
If only a part of the amount of the instrument is endorsed, it is a case of
partial endorsement. An endorsement which purports to transfer to the
endorsee only a part of the amount payable, or which purports to transfer
the instrument to two or more endorsees severally, is not valid.
5. Conditional Endorsement:
If the endorser of a negotiable instrument, by express words in the
endorsement, makes his liability or the right of the endorsee to receive the
amount due thereon, dependent on the happening of a specified event,
although such event may never happen, such endorsement is called a
conditional endorsement (Section 52 of NI Act). Such an endorser gets the
following rights:
He may make his liability on the instrument conditional on the happening of a
particular event. He will not be liable to the subsequent holder if the
specified event does not take place to the instrument even before the
particular event takes place.

For example, pay C if he returns from London. Thus C gets the right to
receive payment only on the happening of a particular event, i.e. if he returns
from London.
Effect of Endorsement
An unconditional endorsement of a negotiable instrument followed by its
unconditional delivery has the effect of transferring the property therein to
the endorsee. The endorsee acquires a right to negotiate the instrument
further to anyone he likes.
Section 50 of NI Act also permits that an instrument may also be endorsed
so as to constitute the endorsee an agent of the endorser.
To endorse the instrument further or
To receive its amount for the endorser or for some other specified person.
Usual forms of Banks Endorsement:
1. Payees Account Credited
For: EXIM, Elephant Road Branch Officer Where the payees name in the
cheque and name in the depositors slip is same.
2. Payees Account will be Credited on realization
For: EXIM, Elephant Road Branch Officer In case of OBC
3. Our Branch endorsement conformed
For: EXIM, Elephant Road Branch, Dhaka. OBC received from other branch for
collection
4. Purchasers Account Credit
For: EXIM, Elephant Road Branch In case of cancellation of DD/PO etc.
5. Received Payment for EXIM, Elephant Road Branch Officer In case of a
cheque where the Branch is the Beneficiary in the name of EXIM, Elephant
Road Branch or yourself.

----------------------------------------------------------------------------------------------------------------------------------

Inchoate Instrument
An incomplete financial instrument that can be

completed by the addition of a payee's name or

an amount.
Inchoate instrument means an unregistered, unrecorded
instrument that becomes effective to third parties only
when the instrument is recorded. For instance, a deed which
is valid between parties to the deed will become effective as
against the world, only when it is recorded. Therefore, until
such deed is registered, it is an inchoate instrument.
The term ambiguous instrument is defines in section 17 of the
Negotiable Instruments Act. As per this section, an ambiguous
instrument is one which in form is such that it may either be treated
as promissory note or bill of exchange. In such cases the holder may
either treat it as a promissory note or bill of exchange. Once he
exercises his option, he is bound by it i.e. he cannot fall back that it is
the other kind of instrument.
As a matter of fact, in negotiable instrument, the amount undertaking
or ordered to be paid is stated in figures as well as in words. In such
cases the amount stated in words shall be taken as the amount of the
instrument (Section 18).

Garnishee Order & Attachment Order

Garnishee means a debtor to the debtor. Garnishee
order is an attachment order of the court under section
60 of CPC 1908 (Order XXI and Rule 46) at the request
of a creditor to attach his debtors fund in the hand of
garnishee (bank holds the deposit balance of the debtor
so bank is here garnishee).

Cheque dishonor:
Q1. What can I do when a cheque is dishonoured for the reason of
insufficient funds. What legal action I can take to get the amount
cleared?
A. On the dishonour of a cheque, one can file a suit for recovery
of the cheque amount along with the cost & interest under order
XXXVII of Code of Civil Procedure 1908 ( which is a summary
procedure and) can also file a Criminal Complaint u/s 138 of
Negotiable Instrument Act for punishment to the signatory of the
cheque for haring committed an offence. However, before filing
the said complaint a statutory notice is liable to be given to the
other party.
Q2. I have got my cheque dishonoured few months back. It was
issued by a Company. What can I do now?
A. On the dishonour of cheque by the company you can file a suit
for recovery of the amount under Order XXXVII of CPC. As you
have stated that cheques were dishonoured few months back and
you have issued no notice to the company bringing to their
knowledge the dishonour of cheques and the life of the cheque is
still valid which is usually six months from the date of issue. You
please present the cheque again and on receipt of the
information about the dishonour of the cheque you immediately
issue notice within 30 days from the receipt of the information of
dishonour of cheque to the company. If the company does not pay
the amount within 30 days from the receipt of the notice, you can
file complaint under Section 138 of the Negotiable Instrument
Act. The said complaint is to be filed within one month on the
expiry of 30 days period of notice.
Q3. Our is the software distribution co. During course of our
business we had supplied software worth Rs.3 lacs. But our client
dishonoured the cheque. We have filed court case on him after

that he paid us Rs. 1 lac and then he has run away. We do not
have any idea about his where about. Court has issued
proclaimed offender notice, but we do not now how to trace him.
He has closed his account and bankers are not cooperating with
information like his other address. Pleas advice?
A. Let the proceedings of declaration of proclaimed Offender be
completed. The accused will be declared Proclaimed Offender
and can be arrested at any time. At this stage, you can not do
anything else. However, simultaneously you can file Suit for
Recovery with the last known address of the accused.
Q4. I have a cheque dishonoured. I have informed the person in
writing, but no response, what should be done to register a case
of cheating, and which place it should be filed? The place of the
bank, where the cheque was dishonoured or the place where the
cheque was handed?
A. When you have informed the person about the dishonour of the
cheque, in case the information is given within 30 days from the
dishonour of the cheque, you can file a Complaint under Section
138 of Negotiable Instrument Act within one month after the
expiry of notice period of 30 days. The Complaint for cheating is
not maintainable legally. However, in certain cases the police
have been registering cases of cheating against the accused.
Q5. I have blank cheques given to me by a partnership firm. Since
they owe me some money which I had given to them as a loan.
Besides the cheques and the statement of accounts. I do not have
anything else. Suppose one day, I suddenly get to know that they
have closed the partnership firm and dissolved it, Can I deposit
the cheques now and legally raise a claim on them and how?
A. You should fill the cheques and present for encashment. The
Partnership Firm as well as partners are personally liable and
even after dissolution also the firm and partners are liable. Once
the cheques are dishonoured you have to file a suit for recovery
of the said amount under the summary procedure provided in
Order 37 of Code of Civil Procedure, 1908. You should also file a

complaint under Section 138 of the Negotiable Instruments Act.

For this you will have to first give a notice, within 30 days of the
dishonouring of the cheques. Then if payment is not made within
30 days of receipt of notice a complaint has to be filed within 30
days thereafter.

payment in due course

Definition
Payment made at or after the maturity of a bill of exchange
to its holder in good faith and without notice that his or her
title to the bill is defective (if such is the case).

Nature of liability under section 138:

The object of bringing in this section as mentioned above is to inculcate faith in the efficacy of
banking operations and credibility in transacting business on negotiable instrument. The
ingredients which are to be satisfied for making out a case under S.138 of the Act are:
1. The cheque is drawn on a bank for the discharge of any legally enforceable debt or other
liability. This means that the cheque must have been drawn for payment of money to a
person other than the drawer for the full or partial discharge [8] of any legally enforceable
debt or liability. Thus what we see here is that if a cheque was given merely as a security,
then a suit cannot be filed upon that and S.138 will not be attracted. Also to bring it under
the ambit of this section, a cheque should have presumably been issued and not merely
drawn for payment in discharge of a debt.
1. The cheque so dishonored must have been presented to the drawee/ 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.[9]
1. The cheque is returned by the bank unpaid.

1. The cheque is returned unpaid because the amount available in the drawers account is
insufficient for paying the cheque.
1. The payee has given a notice to the drawer claiming the amount within 15 days of the
receipt of the information from the bank.[10]
1. The drawer has failed to pay within 15 days from the date of the receipt of notice.
1. The offence under this section is not complete till a statutory opportunity is offered to the
drawer of the cheque for making the default good within 15 days of the receipt of notice
to that effect. It is only the failure of the drawer to avail of this opportunity and meet the
demand for the amount of the cheque that becomes the cause of action under the S.138.
This position was laid down inMahalakshmi Enterprises v. Sri Vishnu Trading Co,[11]
and has been deemed to be one of the essential ingredients of this section.
1. The payee has a limitation period of 30 days, within which he can file a complaint.
Procedure and Practice:
The offence under S.138 is a non-cognizable offence by virtue of S.142 of the Act on account of
the non-obstante clause as comprised in section 142 of the Act, the magistrate must proceed
immediately on complaint. For a complaint however, first a statutory notice must be sent to the
drawer and if the drawer does not reply accordingly within 15 days, it opens itself for
prosecution.
Notice:
A notice is one of the essential characteristic of S.138. The period for cause of action is to be
counted from the date of receipt of notice by the accused. Notice has to be sent to the drawer
within 30 days of the receipt of information from the bank about the dishonor.[44] As regards
liability of dishonor of cheques it is essential to prima facie show that after 15 days of receipt of
notice, the accused failed to pay the amount. In the case of Padmini Polymers Ltd v. Unit Trust
of India,[45] it has been held that a notice is must and mandatory. Unless and until the intention
is clear on the part of the part of the person giving notice that the payment by the drawer of the
cheque should be made within 15 days of receipt thereof, any communication between the
parties insisting for making the payment cannot be termed as notice under S.138 of the Act.
Otherwise the purpose of presenting the cheque time and again during the period of validity
would have no meaning. So far as the question of giving notice is concerned, it is stated that
every person who becomes liable upon an action for dishonor of the instrument and only by such
dishonor either the holder thereof or some party thereto who remains liable thereon may give
notice to such parties as entitled to immediate notice. But the holder may give notice to such
parties as he desires to charge; but he cannot by giving notice make a person liable who is not
otherwise liable under law, e.g., drawee in the case of dishonor of cheques.[46]
Serving the notice:

An important question that arises here is that when is a notice deemed to be served and upon who
is the burden of proving service?
The problem that arises is that the section does not only say delivery of notice, but receipt of the
notice, such wordings in the section can be put to numerous interpretations. The question is if
receipt of notice, postulates actually delivery, then the drawer can easily preempt action against
him by deliberately staying away from his premises and the likes. It would be inequitable that
such a person be let off the hook, while another drawer who stays on and accepts the notice
would subject himself to prosecution.
In the case of V.Raja Kumari v. P.Subbarama Naidu and Anr[47] the question that came up was
what is meant by a proper notice and if there is no proper would the complaint be quashed. In
Clause (c) of the proviso the drawer of the cheque is given fifteen days from the date of receipt
of said notice for making payment. This affords clear indication that giving notice in the
context is not the same as receipt of notice. Giving is the process of which receipt is the
accomplishment. The payee has to perform the former process by sending the notice to the
drawer in his correct address, if receipt or even tender of notice is indispensable for giving the
notice in the context envisaged in Clause (b) an evader would successfully keep the postal article
at bay at least till the period of fifteen days expires. Law shall not help the wrong doer to take
advantage of his tactics. Hence the realistic interpretation for the expression giving notice in the
present context is that, if the payee has dispatched notice in the correct address of drawer
reasonably ahead of the expiry of fifteen days, it can be regarded that he made the demand by
giving notice within the statutory period. Any other interpretation is likely to frustrate the
purpose for providing such a notice. Thus from here we see that there can be deemed notice
even where actual notice has not been given. However this is a rebuttable presumption and its for
the complainant to prove that the notice was served and that the person either refused to accept
the notice or was unavailable.
Though this is the popular position yet, many courts differ in opinion and it has been held that
where the delivery is done by post, then reading S.138 with S.27 of the General Clauses Act
Ingredients:
Though no form of notice is prescribed, the requirement is that the notice shall be given in
writing within fifteen days (now thirty with the amendment).
Secondly when a notice is served, it must demand the said amount i.e. the cheque amount in it.
If no such demand is made the notice falls short of legal requirement.[48] However if apart from
the said amount other amounts by way of interest, costs, etc is mentioned, such a notice would
be a valid notice under the Section. The legislative intent of the Section is quite clear, the drawer
of the cheque will be liable for conviction if the demand is not met within 15days of the receipt.
Thus if the cheque amount is paid within the statutory period or before a complaint is filed the
legal liability under S.138 will cease and for recovery of additional costs, a civil suit will lie.
Also the stating of the cheque number, though seems essential so that the drawer should know of
which cheque the notice relates to, yet it has been held that S.138 does not lay down any such

condition and if the cheque number is absent or wrong, depending on the facts and
circumstances, the notice will deemed good or bad in law.[49]
PENALTIES AND LIABILITIES FOR DISHONOUR:
Dishonoring of a cheque:
In order to begin a discussion on the issue of dishonor under the Act, it is important to first
consider the meaning of the term dishonor and what does it constitute. This finds mention in S.91
and S.92 of the Act.
Dishonor of negotiable instruments may be of two kinds:
1. Dishonor by non-acceptance.
2. Dishonor by non-payment is said to be dishonoured.[13]
3.
S.91 [14] of the Act speaks of dishonor by non-acceptance. What we see from this definition is a
condition of presentment of the negotiable instrument, however presentment for acceptance is
required only in the case of a bill of exchange. Usually acceptance and payment go together and
this usually happens in case an instrument is payable after sight, thus often it is difficult to
distinguish the two because dishonour by non-payment is usually dishonor by non-acceptance,
[15] and thus it is only this bill of exchange which can be dishonored by non-acceptance and not
a cheque as in the case of a cheque no acceptance is required to be taken to the banker and
cheques are mainly instruments payable at sight .[16]
The second kind of dishonor is that of dishonour by non-payment. A negotiable instrument is
said to be dishonored by non-payment when the drawee of a cheque makes default in payment
upon being duly required to pay the same.[17] A drawee can dishonor a cheque
Thus it is well established that cheques are always dishonored only for the reason of nonpayment and not non-acceptance.
Apart from the broad heads mentioned above, cheques can be dishonored by the banker for
several reasons. (i) payment countermanded, (ii) insufficiency of funds, (iii) non-applicability of
funds, (iv) improper presentation, (v) notice of death of account holder, (vi) courts order
prohibiting payment, (vii) post-dated cheques, (viii) stale cheques, (ix) lunacy, (x) insolvency,
etc. the researcher will proceed to deal with only few of these instances.
Payment countermanded:
When the drawer of the cheques issues instructions to the bank not to make any payment of a
particular cheque issued by him, the bank then stands revoked from making payment on that
cheque, this is known as countermand of cheques by the drawer.[18] It must be noted here that

any payment by the bank after such notice will not be considered as good payment. When a
drawer wishes to stop payment he must give notice to the Bank, though it is usually the drawer
who gives such notice, however a payee can give a notice to the banker that the cheque is stolen
or lost. In such a case the banker must inform the drawer, so that the latter can give necessary
instructions.[19]
Insufficiency of funds:
When there are no funds to meet the cheque or the account of the drawer does not hold sufficient
funds to meet the whole credit amount of the cheque, the banker is then justified in refusing the
payment of such a cheque. However where the account has sufficient funds, the banker is under
an obligation to its customer of honoring the cheque presented to it.
A cheque when dishonored for the purpose of insufficiency of funds, the drawer of such cheque
is liable to penal consequences as under S. 138 of the Act. However there maybe an agreement to
the contrary whereby the banker has undertaken to meet the customers cheques even though
there may not be sufficient funds in his account, then in such a case the banker is bound to honor
the cheque failing which the banker would be liable by way of breach of contract for an overdraft
facility[20] and the necessary legal consequences will ensue.
One issue that arises here and has been under constant debate, is that whether a cheque returned
by the banker endorsed with the words refer to drawer would amount to a dishonor under
S.138. after a number of decisions on the point, there has been a sort consensus on the point and
courts have often said that refer to drawer meant nothing but that the drawer lacked sufficient
funds in his account and therefore S.138 would be attracted in certain circumstances.
Non-applicability of funds:
Under S.31 of the Act it is the bankers duty to honour the cheque when funds which are lying in
the account of the drawer are applicable for the purpose. Thus when the funds in the account are
lying for other purposes, the will necessarily dishonour the cheque presented before it for
payment. An example of such a situation is when the banker may have a lien over the funds lying
in the account of the drawer under S.171 of the Indian Contract Act. Another situation might be
where the funds in the account of the drawer is meant for a trust and a cheque is drawn in breach
of a trust.[21]
Effects of dishonor of cheque:
Firstly, taking of a legal action. The payee/holder can take action against the drawer of such a bill
may take action on the exact time of dishonoring of the bill. Thus the holder need not wait for the
bill to mature and then to take action for dishonoring the same.[22] Secondly, when a cheque is
said to be dishonored it loses its basic characteristic of negotiability with immediate effect.
Thirdly, on the dishonoring of a cheque, nothing prevents the holder thereof to present it again
particularly on being asked by the drawer of the cheque. Lastly, under S.138, mere dishonoring
of cheques does not give rise to a cause of action in favour of the complainant but it accrues only
after the issue of demand notice and failure of the drawer to make the payment.[23]

The payee or holder of a cheque has the right to present the cheque for payment for any number
of times and he may have it repeatedly dishonored, but he can prosecute the drawer only once.
[24]
Burden of proof:
Under this law all presumptions are made against the drawer of such cheques and thus the onus
of proof is left on the accused rather than the prosecutor.
Conclusion
Though insertion of the penal provisions have helped to curtail the issue of cheque arising out of
its dishonor either honestly or with dishonest intention and the trading community now feels
more secured in receiving the payment through cheques. However there being no provision for
recovery of the amount covered under the dishonored cheque, in a case where accused is
convicted under section 138 and the accused has served the sentence but, unable to deposit
amount of fine, the only option left with the complainant is to file civil suit. The provisions of the
Act do not permit any other alternative method of realization of the amount due to the
complainant on the cheque being dishonored for the reasons of insufficient fund in the
drawers account. The proper course to be adopted by the complainant in such a situation should
be by filing a suit before the competent civil court, for realization/ recovery of the amount due to
him for the reason of dishonored cheque which the complainant is at liberty to avail of if so
advised in accordance with law. Thus what we see is that the section is not full proof, however
there is no denying that this provision has done away with the rigorous and time consuming
methods of criminal law. In support of this we can see that the section also provides for summary
proceedings, making the issue penalty a lot simpler, because if a cheque gets dishonored today
and proceedings go on as usual, then the person may only get relief after say three or four years,
this defeats the purpose of a cheque which is meant for immediate acceptance and distribution