Drawer of a Cheque: Meaning, Roles, and Responsibilities

The drawer of a cheque is the person or entity that issues and signs the cheque and instructs the bank to make the payment. In a cheque transaction, the drawer creates the payment instruction, the drawee bank processes it, and the payee receives the payment.

A cheque generally involves three parties:

The Negotiable Instruments Act, 1881 recognises the drawer of a cheque as a principal party to the instrument. The Act also provides that the drawer of a bill of exchange and the maker of a cheque can have principal liability under the applicable provisions. For a borrower, the drawer is usually the account holder who issues a cheque to pay an EMI, loan instalment, vendor, individual, or another liability.

Who is responsible for a cheque issued from a bank account?

The drawer is responsible for issuing the cheque and ensuring that the payment instruction can be honoured. The drawer is the person or entity that holds the bank account and authorises the payment by issuing the cheque. The drawee bank processes the cheque based on the drawer's instruction, while the payee is the person or entity intended to receive the payment. The drawer's responsibility continues until the payment obligation is appropriately met. A cheque may be returned if there are issues such as insufficient funds, a signature mismatch, incorrect cheque details, an expired cheque or other reasons identified by the bank. The drawer should therefore ensure that the cheque is properly issued and that the account is maintained in a manner that allows the payment to be processed. If a cheque is dishonoured, the bank provides the applicable return reason. For loan or EMI payments, a returned cheque means that the scheduled payment may remain outstanding. The borrower should verify the amount due and use an authorised payment method to clear the outstanding dues. Depending on the circumstances, cheque dishonour may also result in applicable bank charges or other consequences under the relevant terms and laws.

What is the difference between drawer, drawee, and payee?

A cheque transaction generally involves three parties: the drawer, drawee, and payee. Understanding their roles helps clarify who issues the cheque, which bank processes the payment, and who receives the funds.

In simple terms, the drawer issues the cheque, the drawee bank processes the payment, and the payee receives the funds. For example, when a borrower issues an EMI cheque to a lender, the borrower is the drawer, the borrower's bank is the drawee, and the lender is the payee.

For borrowers, knowing these roles can help identify where an issue may arise if a cheque is returned unpaid. The drawer should ensure that the cheque details, signature, and available funds are in order, while the payee can follow up on the payment if the cheque is dishonoured.

The drawer must issue a cheque accurately and ensure the account and payment instructions support successful processing. These obligations help prevent avoidable cheque returns and ensure that genuine payment commitments are met.

• Maintain sufficient funds: Ensure adequate funds or an available banking facility to honour the cheque when presented.
• Provide accurate details: Enter the date, payee name and amount correctly, with the amount in words and figures matching.
• Use a valid signature: Sign the cheque in accordance with the specimen signature registered with the bank.
• Avoid unauthorised alterations: Do not make changes that could affect the cheque's validity or processing.
• Honour valid payment instructions: Ensure that a valid cheque issued for a genuine payment or liability can be honoured when presented.
• Respond to dishonour: If the cheque is returned unpaid, address the underlying payment obligation and any applicable consequences promptly.

For loan or EMI payments, fulfilling these responsibilities is particularly important because a returned cheque may leave the scheduled payment unpaid. If a cheque is dishonoured, the borrower should verify the outstanding amount and pay through an authorised channel to regularise the dues.

How can a cheque bounce affect a loan repayment?

A cheque bounce can leave the related EMI or loan instalment unpaid, resulting in an overdue amount and applicable charges under the loan terms. Continued non-payment may lead to further account-level or legal consequences, depending on the circumstances. However, cheque dishonour does not automatically result in criminal liability under Section 138 of the Negotiable Instruments Act, 1881. Section 138 applies to dishonour of a cheque issued towards a legally enforceable debt or liability due to insufficient funds or where the amount exceeds the arrangement with the bank, subject to statutory requirements. These include presenting the cheque within its applicable validity period, issuing a written demand notice within 30 days of receiving information about the dishonour, and the drawer failing to make payment within 15 days of receiving the notice. A borrower who receives a legal notice about a dishonoured cheque should review it carefully and take timely steps to address the outstanding loan repayment.