Cheque Dishonour, Cheque Bounce and Role of Banks in cases under Negotiable Instruments Act, 1881

Cheque Dishonour, Cheque Bounce and Role of Banks in cases under Negotiable Instruments Act, 1881

It is noted in S. Devan v. C. Krishna Menon [2010] GCtR 6454 (Kerala) that "it is common knowledge that a Banker will be interested in protecting a valued customer of his. The Banker may not readily make an endorsement that the funds are insufficient. Expressions “refer to drawer” etc. are skilfully employed by the Banker to avoid inconvenience to a valued customer even when funds are insufficient. Culpability under Section 138 of the Negotiable Instruments Act, 1881 cannot obviously be left entirely to the Banker who makes the endorsement while dishonouring the cheques." 

"The court in order to effectively implement the scheme under Section 138 of the Negotiable Instruments Act must reserve for itself, the power to decide the real reason that prompted the banker to dishonour the cheques. The reason given by the banker may be relevant. But it is for the court on the basis of the materials available before it come to a definite conclusion as to what was the actual and the real cause for dishonour."