Sections 30-31 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Section 30 makes the drawer of a bill of exchange or cheque liable to compensate the holder if the drawee or acceptor dishonours it, provided due notice of dishonour has been given. Section 31 requires the drawee of a cheque who has sufficient funds of the drawer to pay it when duly required, and to compensate the drawer for loss caused by default. This article reads both as per the consolidated text consulted. If a cheque you hold has come back unpaid and you want to claim, a recovery notice is the usual first formal step.
The drawer of a bill or cheque must compensate the holder if the drawee or acceptor dishonours it, provided due notice of dishonour has been given to, or received by, the drawer (s.30). The drawee of a cheque holding sufficient funds of the drawer, properly applicable to its payment, must pay when duly required, and must compensate the drawer for any loss or damage caused by default (s.31).
Section 30: liability of the drawer
The text says: the drawer of a bill of exchange or cheque is bound in case of dishonour by the drawee or acceptor thereof, to compensate the holder, provided due notice of dishonour has been given to, or received by, the drawer as hereinafter provided.
The elements
| Element | Text |
|---|---|
| Who is liable | The drawer of a bill of exchange or cheque |
| Trigger | Dishonour by the drawee or acceptor |
| Duty | To compensate the holder |
| Condition | Due notice of dishonour given to, or received by, the drawer |
| Where the notice rules are | "As hereinafter provided", that is, later in the Act |
Who is the drawer
The drawer is the maker of a bill or cheque (see our article on section 7). On a cheque the drawer is the person who signs it and the drawee is the bank. On a bill the drawer is the person who issues the order and the drawee, or after acceptance the acceptor, is the person directed to pay.
The trigger: dishonour
Section 30 speaks of "dishonour by the drawee or acceptor". The rules on dishonour by non-acceptance and non-payment are in later sections of the Act and are covered in later articles of this series. The word "acceptor" is there because a bill, unlike a cheque, can be accepted.
The duty: compensate the holder
The drawer is "bound ... to compensate the holder". The text does not say here how compensation is measured. Section 117 deals with compensation on dishonour and a later article in this series explains it. This article states no amount or rate.
The condition: due notice of dishonour
The drawer's liability under section 30 is conditional on "due notice of dishonour" having been "given to, or received by, the drawer". The phrase "as hereinafter provided" points to the later provisions on notice. Our article on sections 93 and 94 takes up who gives notice and how. In practice, a holder who wants to claim from the drawer should make sure a proper notice of dishonour goes to the drawer promptly, and keep proof.
Two points must not be confused. First, this notice is the general notice of dishonour of this part of the Act. Second, the demand notice required before a criminal complaint for a dishonoured cheque under section 138 is a different matter; see our post on section 138. Section 30 is the civil liability to compensate; this article does not describe the criminal provision.
Example with invented names
Ritesh Constructions draws a cheque on its bank in favour of Sandhya Suppliers. Sandhya deposits it and the bank returns it unpaid. Sandhya, as holder, may claim compensation from Ritesh as drawer under section 30, provided due notice of dishonour has been given to, or received by, Ritesh as the Act provides. If no due notice is given, the condition in the section is not met.
Section 31: liability of the drawee of a cheque
The text says: the drawee of a cheque having sufficient funds of the drawer in his hands properly applicable to the payment of such cheque must pay the cheque when duly required so to do, and, in default of such payment, must compensate the drawer for any loss or damage caused by such default.
The elements
| Element | Text |
|---|---|
| Who | The drawee of a cheque, in practice the bank |
| Condition | It has sufficient funds of the drawer in its hands, properly applicable to the payment of the cheque |
| Duty | Must pay the cheque when duly required so to do |
| Consequence of default | Must compensate the drawer for any loss or damage caused by the default |
"Sufficient funds ... properly applicable"
Two words matter. The funds must be sufficient to meet the cheque, and they must be properly applicable to its payment. Funds that are for some reason not properly applicable to the payment of that cheque do not trigger the duty. The text does not define "properly applicable" or give examples, and none is invented here.
"When duly required"
The bank must pay "when duly required so to do". The text does not describe what makes a requirement "due", and does not mention time limits or banking hours here. Later sections on presentment explain how a cheque is presented, and a later article covers them.
Who the bank must compensate
On default the bank "must compensate the drawer". Note who is compensated: the drawer, not the payee. The payee's claim, if any, is against the drawer under section 30. The drawer's claim is against the bank under section 31.
Example
Tarini Foods has enough money in its account, properly applicable, and issues a cheque to a supplier. The bank wrongly refuses to pay when the cheque is duly presented. Under section 31 the bank must pay, and for the default it must compensate Tarini Foods for any loss or damage caused. The text gives no list of losses and states no measure. The example only illustrates the direction of the duty.
Side-by-side
| Point | Section 30 | Section 31 |
|---|---|---|
| Instrument | Bill of exchange or cheque | Cheque |
| Person liable | Drawer | Drawee (bank) |
| To whom | The holder | The drawer |
| Trigger | Dishonour by drawee or acceptor | Failure to pay a duly required cheque when sufficient funds are in hand |
| Condition | Due notice of dishonour to the drawer | Sufficient funds properly applicable |
Reading them together
The two sections run in different directions. When a cheque is dishonoured, the holder may look to the drawer (section 30). If the dishonour was the bank's wrong, because the drawer had sufficient funds properly applicable, the drawer may look to the bank (section 31). A drawer who has been called on by a holder for a dishonour caused by a bank's default should keep the account record, the cheque return memo and the notice.
Neither section says anything about the time within which a claim must be made. For limitation questions, see our guide on limitation period for contract suits.
Need help recovering on a dishonoured cheque?
If a cheque issued to you has been returned unpaid and you want to claim from the drawer, a properly worded demand can be the first step. See our recovery notice service.
Key takeaways
- The drawer of a bill or cheque must compensate the holder on dishonour by the drawee or acceptor.
- The drawer's liability depends on due notice of dishonour being given to, or received by, the drawer as the Act provides.
- A bank with sufficient funds of the drawer properly applicable to a cheque must pay it when duly required.
- On default the bank must compensate the drawer, not the payee.
- The sections do not state a measure of compensation or a time limit.
Read next
- Sections 27-29: agency and liability of an agent or legal representative who signs
- Sections 32-34: liability of maker and acceptor, and who can accept a bill
- Section 138: cheque bounce
- Cheque bounce in business transactions: practical guide
Disclaimer: Based on a consolidated text of the Negotiable Instruments Act, 1881 stating the position as of 26 December 2015 and on the Negotiable Instruments (Amendment) Act, 2018, as consulted on 2 October 2026. Later amendments and current criminal procedure law should be checked. This article is general information, not legal advice; check the official text before acting.