Drawee

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Introduction
A drawee is the person or entity upon whom a negotiable instrument is drawn and who is ordered to pay the amount specified. In the cheque context the drawee is ordinarily a banker (the bank/branch) on which the cheque is drawn. Correct identification and practical handling of the drawee are central to negotiable-instrument practice in India: the drawee’s actions (payment, acceptance, or dishonour) trigger statutory remedies, create documentary evidence (bank memos, return-notes), and determine the tactics for civil recovery and criminal prosecution under the Negotiable Instruments Act, 1881 (NI Act). For litigators and banking counsel, precise appreciation of the drawee’s legal status — and the documentary footprint it leaves — is decisive.

Core Legal Framework
– Negotiable Instruments Act, 1881
– Section 5 (Bill of exchange): defines a bill of exchange as an instrument containing an unconditional order directing a certain person (the drawee) to pay a sum of money to another. This provision frames the drawee’s role in bills of exchange.
– Section 6 (Cheque): defines a cheque as a bill of exchange drawn on a specified banker and payable on demand. In the cheque paradigm the drawee is the specified banker/branch.
– Section 138: creates penal liability for dishonour of a cheque for insufficiency of funds or where it exceeds the arrangement in the account; this provision is engaged by the drawee bank’s return of a cheque unpaid and the subsequent written notice and non-payment by the drawer.
– Evidence and Procedure
– Bank’s return memo, unclipped cheque, and account statements are key documentary items admissible in evidence in both civil and criminal forums; the drawee’s records are treated as primary proof of presentment and dishonour.
– Banking law / Contractual duties
– The relationship of customer and banker (contractual mandate) governs the drawee-bank’s duties to pay, to follow stop-payment instructions, and to exercise mandate-based defenses. The bank, as drawee, is not a “drawer” or “endorser” and ordinarily is not liable under s.138 which targets the drawer/maker who signs the cheque.

Practical Application and Nuances
1. Who is the drawee in practice?
– Cheque: the named banker/branch (e.g., “State Bank of India, Fort Branch”). If the drawee is not specified clearly, presentment issues can arise — identify the branch and account number imprimatur on the cheque.
– Bill of exchange: any person/business on whom the bill is drawn and who is ordered to pay; acceptance transforms the drawee into acceptor with direct liability.

  1. Presentment and the drawee’s role
  2. Presentment to the drawee is essential to create liability in many cases: the cheque must be presented for payment to the drawee (bank) in the manner prescribed by banking practice. The drawee’s act of paying or returning is the factual event that triggers remedies under NI Act (especially s.138).

  3. For bills of exchange, presentment for acceptance is a separate procedural step: the drawee may accept, in which case they become directly liable.

  4. Dishonour, return memo and statutory notice

  5. When the drawee-bank returns a cheque unpaid (for “insufficient funds,” “account closed,” “payment stopped,” etc.), the drawee’s return memo is the primary documentary evidence of dishonour. Practitioners must obtain the original returned cheque bearing the drawee’s stamp and return memo.

  6. Section 138 steps: from the drawee’s return the payee must send written notice to the drawer (not the drawee) within the statutory period, demanding payment. If the drawer fails to pay within the statutory 15 days after receipt of notice (procedural timings set by statute/law), a criminal complaint may follow.

  7. Drawee-bank’s duties and defenses

  8. The drawee acts under the mandate of its customer (the drawer). Bank pays if funds are available and all formalities are met; it refuses/returns if there are insufficient funds, stop-payment instructions, or other valid restrictions (garnishee orders, lien, forged signature).
  9. Bank can defend on grounds such as forged signature, materially altered cheque, stop-payment instructions given by drawer prior to presentment, closed account, or compliance with court orders — such defenses are often factual and supported by contemporaneous bank records and instruction logs.

  10. Critically: the drawee-bank itself is generally not the target under s.138 (which attaches to the drawer/maker), but the bank’s records are decisive evidence and the bank may be joined in civil recovery actions where plaintiff seeks tracing of funds, injunctions, or subrogation/filing of suits for conversion in limited circumstances.

  11. Practical evidence chain

  12. Preserve original cheque(s) and obtain the drawee’s return memo (originally stamped and signed).
  13. Procure copy of the paying bank’s ledger / account statement showing non-credit or return.
  14. Where necessary, seek production of the drawee’s internal records by issuing summons/notice under Civil Procedure Code, or by application under discovery rules in civil suits; in criminal Section 138 trials, call bank officials as witnesses and seek production under summons.

  15. Use reconciliation statements to track whether funds were actually available at the time of presentment.

  16. Presentment time-limits and stale cheques

  17. Check clearance rules and banking practice for acceptability of cheques after long delays; “stale” cheques may create defenses for the drawee. If a cheque has become stale or materially delayed before presentment, the drawee may refuse payment reasonably.

  18. Stop-payment and garnishee implications

  19. Stop-payment orders given by the drawer before presentment are a lawful defense for the drawee; the drawee must record and prove time-stamps and instruction compliance.
  20. If there is a garnishee or attachment order, the drawee must comply; counsel should inspect such orders when advising on possible dishonour reasons.

Landmark Judgments (principles to remember)
– Principle 1 — Drawee’s role and documentary primacy: Courts have consistently treated the drawee-bank’s return memo and stamped returned cheque as primary, prima facie evidence of presentment and dishonour; obtaining and proving these documents is often determinative.
– Principle 2 — Bank is not the drawer under s.138: Judicial pronouncements have emphasized that criminal liability under Section 138 attaches to the drawer/maker/signatory and not to the drawee bank; the drawee’s role is evidentiary and operative (payment/return), not that of the cheque’s author.
– Principle 3 — Bank’s defenses rely on contemporaneous records: Courts give weight to a drawee-bank’s internal records (stop-payment instructions, account statements, authority logs) where produced and properly proved through bank officials.

(Practitioners: read the full Supreme Court and High Court jurisprudence on Section 138 and evidentiary weight of bank memos in your jurisdiction before filing or defending — these principles are well-established across decisions.)

Strategic Considerations for Practitioners
For Payees / Plaintiffs (advice to counsel):
– Secure the original cheque and drawee’s return memo immediately. Without originals, Section 138 prosecution or civil suit becomes vulnerable.
– Preserve the chain of custody: get an acknowledgment from the presenting bank and obtain the bank’s certified copies of the return memo and ledger entries.
– Draft statutory notice precisely: reference the cheque number, date, drawer account particulars, reasons for return as recorded by the drawee; serve within the statutory window.
– Choose remedy wisely: criminal Section 138 complaint is quick and coercive but limited to penal consequences and requires stringent compliance with procedural timelines; a civil suit can pursue full recovery and ancillary relief (interest, damages) and processes to compel discovery from the drawee (production of records).
– Use the drawee’s records strategically in discovery: seek particulars of presentment time, clearing-house entries, and stop-payment logs to demonstrate the drawer’s culpability.

For Drawers / Defendants (advice to counsel):
– Immediately obtain the drawee-bank’s entire contemporaneous file: stop-payment orders, specimen signature verification, ledger, timestamped presentment records, clearing messages (if any).
– Attack procedural defects: defective statutory notice, late notice, absence of proper presentment to drawee, stale cheques, or lack of drawer signature authenticity.
– If bank returned cheque citing “insufficient funds,” determine whether there was an arranged overdraft or temporary credit; misuse of bank-memo language by presenting bank can be exposed by production of complete records.
– Where the drawer instructed stop-payment prior to presentment, collate screenshots/acknowledgments, timestamps, SMS/email logs and compel the drawee to produce instruction logs.

Common Pitfalls to Avoid
– For plaintiffs: relying on photocopies rather than producing the original returned cheque and the drawee’s stamped return memo. Courts almost invariably require originals for Section 138 proof.
– For defendants: failing to secure and produce the drawee bank’s internal records and witnesses to explain standard operating procedures and the chronology of presentment.
– For both sides: neglecting to identify the exact drawee branch and misnaming or misaddressing notices/pleadings — precise identification of the drawee matters for establishing presentment and for locating the return memo in bank files.
– Failing to consider alternate remedies (injunctions, garnishee suits, tracing/attachment) where the drawee’s acts reveal potential diversion of funds.

Checklist for a Practitioner Handling a Cheque Dispute (Drawee-focused)
– Immediate steps on receipt of dishonour: obtain original returned cheque + bank return memo + account statement showing no credit.
– Verify timeline: date of cheque, date of presentment to drawee, date returned to presenting bank, date of notice to drawer, and date of drawer’s receipt of notice.
– Preservation: get certified copies of drawee’s records; consider interim preservation orders if the drawee’s records are at risk.
– Tactical decision: initiate s.138 complaint (ensure compliance with limitation/notice) or file civil suit for recovery (with discovery against drawee).
– In defense: obtain all drawee records and challenge authenticity/regularity if necessary.

Conclusion
The drawee — typically the banker in the cheque context — is not merely a passive actor; the drawee’s conduct (payment or return) and records create the evidentiary foundation for both civil recovery and criminal prosecution under the NI Act. For practitioners, the single most important practical maxim is to secure the drawee’s documentary trail: the original returned cheque with the drawee’s stamp/memo, the paying bank’s ledger entries, and contemporaneous instruction logs. Litigation strategies hinge on these materials: they establish presentment, demonstrate the reason for dishonour, and inform whether to proceed criminally under s.138 or civilly for recovery and ancillary relief. Meticulous attention to the drawee’s role and records converts procedural compliance into substantive advantage.