When a cheque is dishonoured, two separate routes open up. They are not alternatives in the sense that one must be abandoned to pursue the other. They do different work, and the best result comes from understanding what each is for.
The criminal route: section 489-F PPC
Section 489-F of the Pakistan Penal Code, 1860 makes it an offence to dishonestly issue a cheque towards repayment of a loan or fulfilment of an obligation where the cheque is dishonoured on presentation. It is punishable with imprisonment which may extend to three years, or with a fine, or with both.
Three elements have to be established:
- The cheque was issued dishonestly
- It was issued towards repayment of a loan or fulfilment of an obligation
- It was dishonoured when presented
That middle element does most of the work in practice. A cheque handed over as security, or as a blank instrument later filled in, is frequently defended on the footing that it was not issued towards an existing obligation at all.
What the criminal route does well is create pressure. What it does not do is put money in your account: a conviction is a punishment, not a decree.
The civil route: recovery, and the summary suit
The civil claim is what actually recovers the money. Where the claim rests on a written contract or a negotiable instrument such as a cheque, it can often be filed as a summary suit under Order XXXVII of the Code of Civil Procedure, 1908.
The advantage is procedural. In an ordinary suit the defendant files a written statement as of right and the matter goes to trial. In a summary suit the defendant must first obtain the court's leave to defend, and leave is granted only where a genuine, substantial defence is shown. A defendant with no real answer cannot simply delay.
The result is a decree, which is then executed, including by attachment where that is necessary.
Which to use
It depends less on the law than on the other side:
- Where the debtor has assets and is simply stalling, the civil recovery suit is the route that ends in payment
- Where the debtor is evasive, the criminal complaint is often what brings them to the table
- Where the amount is large and the relationship is commercial, both are commonly pursued in parallel
Running both is legitimate. Using the criminal complaint purely as leverage in what is obviously a civil dispute is not, and courts see it.
Before you file either
Preserve the record: the dishonoured cheque itself, the bank's memo stating the reason for dishonour, the correspondence establishing the underlying obligation, and any acknowledgement of the debt. A formal legal notice demanding payment costs little and settles a surprising number of these matters without a case at all.
Limitation applies to the civil claim. Do not let the cheque sit in a drawer for three years.
Related practice area
Contractual Liability Litigation →