Chapter III - Parties to Notes, Bills and Cheques
Section 31
Section 31: liability of drawee of cheque
Section 31 addresses the drawee bank’s duty to pay a duly presented cheque when it holds sufficient, properly applicable funds, and its liability to the drawer for wrongful non-payment.
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Need advice on Section 31?
This article is for general information. Refer to the Negotiable Instruments Act, 1881 official text for the official provisions. If you need professional advice for your situation, contact Bizeneed.
Statutory text
Bare law
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.
Applicability and limits
A drawee bank with sufficient funds properly applicable to a cheque must pay it when duly required; wrongful default requires compensation to the drawer for resulting loss or damage.
The obligation is conditional on sufficient funds, proper application and due requirement; the compensation claim here belongs to the drawer.
Hypothetical example
Hypothetical: a business has available funds and its bank wrongly refuses a duly presented cheque. The business records the balance, presentation and reputational or transactional loss.
Evidence and decision flow
Verify available and properly applicable funds.
Preserve presentment and refusal records.
Document the drawer’s resulting loss.
Practical checklist
Do
- Check the account balance and any restriction affecting application of funds at presentment.
- Preserve presentment, return reason and evidence of any loss to the drawer.
Avoid
- Do not treat the instrument label alone as conclusive; check the signed wording and related statutory conditions.
Glossary
- Drawee bank
- The bank on which the cheque is drawn.
- Properly applicable funds
- Funds available for the bank to use to pay that cheque.
Frequently asked questions
Who may claim compensation under Section 31?
The section specifies compensation to the drawer for loss caused by the bank’s default.
Does any bank refusal breach this section?
No. Check sufficient, properly applicable funds and due requirement to pay.
Need help applying this provision to your situation?
Contact BizeneedLast updated 10 October 2026