Sections 82A – 82F of the Bills of Exchange (Amendment) Act, No. 13 of 2025 introduces stronger penalties, clearer rules, and faster legal remedies for dishonoured cheques under the Bills of Exchange Ordinance No. 25 of 1927 (as amended). The new amendment sets out what constitutes an offence, who can take legal action, the penalties, and the specific conditions under which these provisions apply.
When does dishonouring a cheque become an offence?
In terms of Section 82A (1), a person commits an offence where a cheque issued by such person (“Drawer”) in discharge of any debt or liability is returned unpaid by the bank for any of the following reasons:
- Insufficient funds in the account of the Drawer to honour the cheque (Section 82(3) provides that where a cheque is dishonoured with the remarks ‘refer to drawer’, ‘account closed’, or ‘payment countermanded by drawer’, whether by the drawee bank or stated in a return notification, it shall be presumed to be for insufficiency of funds in the drawer’s account).
- The cheque amount exceeds the payment amount arranged with the bank for that relevant account.
- The Drawer issuing the cheque from a closed account.
- The Drawer countermanding payment of the cheque without any legitimate reason.
Such circumstances constitute an offence only if:
- The cheque has been presented to the drawee bank within 6 months from its drawing date or within its period of validity, whichever is earlier;
- The payee or holder makes a written demand for payment to the drawer within 90 days of receiving information from the collecting bank or drawee bank about the cheque being returned unpaid; and
- The Drawer fails to make the payment to the payee or holder within 90 days of the date of such written demand.
Furthermore, in terms of Section 82E, unless proven otherwise, it is presumed that the payee or holder received the cheque as payment, whether in full or in part, for a debt or other liability of the drawer.
Penalties for dishonouring a cheque
Penalties for an offence upon conviction include the following:
- A fine equivalent to the amount of the cheque; or
- Imprisonment of either description for a term not exceeding 2 years; or
- Both fine and imprisonment.
Who should institute legal action and when?
In terms of Section 82B, the payee or holder of a cheque which has been returned unpaid due to insufficiency of funds in the account of the Drawer may institute legal action. Such action must be instituted within 30 days of the expiration of the 90-day period following the written demand being made.
In which court should action be instituted?
In terms of Section 82C, jurisdiction to hear and determine an offence is vested in the Magistrate’s Court within whose jurisdiction the relevant bank branch is located:
- If the cheque was deposited: the Magistrate’s court within the local jurisdiction of the branch where the payee’s or holder’s account is maintained for cheque collection; or
- If the cheque was presented for payment: the Magistrate’s court within the local jurisdiction of the branch of the drawee bank where the drawer’s account is maintained for cheque payment.
Evidence of dishonour
In terms of Section 82D, the following would be conclusive evidence of a dishonored cheque:
- The cheque return notification issued by the collecting bank;
- The deposit slip acknowledged by the collecting bank; or
- The cheque returned by the drawee bank.
Who would be liable if a company, firm, or unincorporated body commits an offence?
Upon conviction, the following persons of the relevant entity will be deemed to have committed such offence;
- Company: every director, manager or secretary at the time the offence was committed
- Firm: Every partner of the firm at the time the offence was committed
- Unincorporated body: Every individual member at the time the offence was committed
However, a director, manager, secretary, partner, or individual member will not be deemed guilty if such person can satisfy the court that the offence was committed without their knowledge or that all due diligence was exercised to prevent its commission.
Key Takeaways
Sections 82A – 82F under the new amendment to the Bills of Exchange Ordinance:
- Strengthen the accountability of cheque drawers.
- Provide clearer legal protection and simplified procedures to payees and holders of cheques.
- Introduce statutory presumptions reducing the burden of proof, making disputes easier to resolve.
- Impose fines and possible imprisonment serving as a strong deterrent against intentional dishonour.
