ISSUANCE OF DUD CHEQUE – LEGAL CONSEQUENCE

History of Cheque –

The ancient Romans are believed to have used an early form of cheque known as praescriptiones in the 1st Century BCE. Beginning in the third century, banks in Persian territory began to issue letters of credit.

However, modern history shows that it was actually not until the 16th February 1659 that a handwritten cheque came into existence in the United Kingdom.  It was drawn on Messrs Morris and Clayton, Scriveners and Bankers based in the City of London, for £400 (about £43,000 today) made payable to a certain Mr. Delboe and signed by one Nicholas Vanacker.

The use of cheque book is however dwindling gradually with the advent of Automated Teller Machine (ATM) and electronic fund transfer or online money transfer.

What is a CHEQUE?

Cheque is an accepted medium of transfer of funds used in settlement of trade and commerce transactions. Honourable Justice Nick Tobi JSC in BolanleAbeke vs The State[1]define defines a cheque as “a written order to a bank to pay a certain sum of money from one’s bank account to oneself or to another person. It is for all intent and purpose an instrument of payment…” Section 73 of the Bills of Exchange Act[2] states that a cheque is a bill of exchange drawn on a banker payable on demand.

However, a cheque is only valuable to the extent that there is adequate fund in the account of the owner. The issue of adequacy of fund is sine qua non to successful drawing up of a cheque.

A cheque drawn in favour of a drawee without adequate funding in the account of the drawer will be dishonoured otherwise known as (Dud Cheque). In Nigeria it is a criminal offence to issue dishonoured cheque – Dishonoured Cheques (Offences) Act CAP D11 LFN 2004.

DISHONOURED/DUD CHEQUES

A dud cheque is a cheque that has no value because the issuer/owner does not have sufficient money in his bank account to pay the sum written on the cheque. It can also be referred to as a cheque that cannot be paid because the person who wrote it does not have money in it or insufficient fund. It is a cheque dishonoured upon presentation to the bank for lack of fund.

In Nigeria, under the Dishonoured Cheques (Offences) Act[3] it is an offence to issue dud cheque. It is noteworthy that the Criminal Code or the Criminal Law of Lagos State did not specifically provide for an offence called issuance of dud cheque but it made provision for an offence of obtaining property by false pretence.

In a bid to deter the practice of issuance of dud cheque, Central Bank of Nigeria (CBN) came up with directives implementing measures to dissuade the commission of the offence. Where any person is found to have issued a dud cheque or is a serial user of dud cheque the banks would be empowered to do the following:

  1. recall or cancel all unused cheque books issued to the serial user of dud cheques;
  2. bar the affected user from the use of clearing system for a period of 5 years;
  3. the name of the dud cheque offenders would be forwarded to three Private Credit Bureaux and Credit Risk Management System (CRMS);
  4. the names of the offenders would be listed in the database of Credit Bureaux and Credit Risk Management System (CRMS) for a period of 5 years from the date of submission. The name of the offender would be removed after 5 years but if the offender is found to have committed another offence of issuance of dud cheque, the name of such offender shall be permanently reinstated on the database;
  5. the serial issuer of dud cheque would be barred from accessing credit facilities from the banking system for a period of 5 years.

Banks are expected to perform status check on potential customers from CRMS and at least two credit Bureaux before on-boarding a customer and where an institution neglects to inform the CRMS (Credit Risk Management System) and Credit Bureaux such act shall be considered as a concealment and misrepresentation of material fact. The affected institution shall be penalised under the Bank and Other Financial Institution Act (BOFIA)[4], also the Chief Executive Officer (CEO), Chief Financial Officer (CFO), Chief Compliance Officer (CCO) and Chief Risk Officer (CRO) shall be liable to sanctions under BOFIA.

It is essential to note that, a criminal and civil action can be taken against a person for the issuance of a dud cheque. The Bill of Exchange Act empowers a person where a bill is dishonoured by non-payment to take an immediate right of recourse against the issuer and endorser accrues to the holder.[5] The Bill of Exchange Act also makes the drawer of a bill liable to compensate the holder or endorser where a bill is dishonoured.[6]

The Dishonoured Cheques (Offences) Act makes it an offence for any person anywhere in Nigeria to induce the delivery of any property or to purport to settle a lawful obligation by means of a cheque which when presented within a reasonable time is dishonoured on the ground that no funds or insufficient fund were standing to the credit of the drawer of the cheque.

By Section 1 (1) of the DishonouredCheques (Offences) Act a person can be said to have committed an offence of issuance of dud cheque where he/she obtains or induces the delivery of anything capable of being stolen to himself or another person or purchases credit for himself or another person by means of cheque, that when presented for payment not later than three months after the date of the cheque, is dishonoured on the ground that no funds or insufficient funds were standing to the credit of the drawer of the cheque in the bank on which the cheque is drawn. The penalty for the offence of issuance of dud cheque is a sentence of two years imprisonment with an option of fine but in the case of a body corporate a fine of not less than N 5,000.

Before any person can be convicted for an offence of under Section 1 (1) (b) (i) of the DishounouredCheques (Offences) Act[7], the following ingredients must be proved:

  1. That the accused person obtained credit for himself;
  2. That the accused person issued a cheque to the Complainant;
  3. That upon presentation the cheque was dishonoured on the ground that there was insufficient funds standing to the credit of the accused person and;
  4. That the cheque was presented not later than three months from the date of issuance.[8]
  5. That the accused person obtained credit for himself

A person can only be convicted for the offence of issuance of dud cheque where the Prosecutor is able to discharge the burden of proof placed upon him by proving beyond a reason doubt or beyond the balance of probability (civil action) that the accused person obtained credit for himself. The cheque must have been issued by the accused person for the discharge of any debt or credit to the payee.[9]

  • That the accused person issued a cheque to the Complainant-

It must be proved that the accused person issued a cheque to the Complainant. In Seed Vest Microfinance Bank Plc. & Anor. vs. Ogunsina &Ors. [10] Per Denton-West J.C.A held that “it is instructive to point out clearly that the issuance of dud cheques is a criminal offence under Section 1 of the Dishonoured Cheques (Offences) Act for which the Appellants was entitled to make a report to the police…”[11]

  • That upon presentation the cheque was dishonoured on the ground that there was insufficient funds standing to the credit of the accused person-

The Complainant must be able to prove that upon presentation to the bank within a reasonable time the cheque was dishonoured. In Bolanle Abeke vs. The State,[12] the Appellant was charged on information before Abeokuta High Court of Ogun State for an offence under Section 1 (1) (b) of the Dishonoured Cheques (Offences) Act. It was alleged that the appellant obtained a credit of N 3,300.00 from Ganiyu Ajayi by means of cheque and the said cheque when presented on due date was dishonoured on the ground that the appellant had no sufficient funds in her account to cover the face value of the said cheque. The trial court found her guilty and sentenced her to two year term of imprisonment. Her appeal was dismissed at the Court of Appeal and Supreme Court.

  • That the cheque was presented not later than three months from the date of issuance-

The Dishonoured Cheques Act[13]provides that the cheque must be presented for payment not later than three months after the date of issuance, where a cheque was presented three months after the date of issuance and was dishonoured the issuer of the cheque cannot be said to have committed an offence. The law provides for a three months life span before a person can be guilty of the offence of issuance of dud cheque.

A person cannot be guilty of an offence of issuance of dud cheque where such person proves to the satisfaction of the court that when he issued the cheque he had reasonable grounds for believing and did believe in fact, that it would be honoured if presented for payment within three months of issuance. For instance, where Mr. A secures a loan to execute a government contract and had been promised payment on a particular date, if the government fails to make payment on that date and Mr A had already issued a cheque to Mr.  B believing that it would be honoured upon presentation at the bank he would not be found guilty of the offence of issuance of dud cheque.

From the foregoing, it is arguable whether or not a person can be convicted of the offence of issuance of dud cheque where he issues his cheque as a guarantor foe a loan obtained by another person and who is in default of payment. Section 1 (1) of the Dishonoured Cheque (Offences) Act did not make provision for a cheque issued as a guarantor. Whether a person who issues a cheque as a guarantor for the payment of a loan secured by another person can be convicted of an offence of issuance of dud cheque if such cheque was dishonoured upon presentation at a bank due to the failure of the other party to repay his loan is a life issue that needs to be tested in the court of law. As it is, there is no single decided case on this issue, as yet.

The High Court of a State is the only Court with jurisdiction to try the offence of issuance of dud cheque. The Act also stipulates that the offence of issuance of dud cheque should be tried summarily.[14]


[1](2007) LPELR-31 (SC)(PP.22,Paras. F-G)

[2] CAP B3 Laws of the Federation of Nigeria (LFN) 2004, Vol. 2

[3] CAP D11 LFN 2004

4 CRMS – The need for a central database from which consolidated credit information on borrowers could be obtained became imperative. It was against this background that the CBN Credit Risk Management System [CRMS] or Credit Bureau was established. The decision to establish a Credit Bureau in Nigeria featured in the Presidential Budget Speech of 1990. Thereafter, it was given a legal backing by the CBN Act No.24 of 1991 [sections 28 and 52] as amended. The enabling legislation empowered the CBN to obtain from all banks, returns on all credits with a minimum outstanding balance of N100,000.00 (now N1.m and above of principal and interest), for compilation and dissemination by way of status report to any interested party (i.e. operators or regulators). The Act made it mandatory for all financial institutions to render returns to the CRMS in respect of all their customers with aggregate outstanding debit balance of N=1,000,000.00 (One million naira) and above. It also required banks to update these credits on monthly basis as well as make status enquiry on any intending borrower to determine their eligibility or otherwise. Banks are penalized for non-compliance with the provisions of the Act.

[4] LFN CAP B3 2004

[5] Section 47 (2) of the Bill of Exchange Act Chapter B8 LFN 2004

[6] Section 55 (1) (a) ibid

[7] CAP D11 LFN 2004

[8] Per Aboki JCA in State vs. Ibe Ugokwe (2018) LPELR-46075 (CA) (pp. 10-12, paras. D-C)

Bolanle Abeke vs. The State (SC. 271/2005) (2007) NGSC 80 (30 March 2007)

[9]Bolanle Abeke vs. The State ibid note 8

[10](2016) LPELR-41346 (CA) (pp. 23-24, paras. F-B)

[11] See Chief (Dr) O. Fajemirokun vs. Commercial Bank Nigeria Ltd. & Anor (2009) 2-3 SC (pt. 1135) 58

[12]  Ibid note 8

[13] Section 1 (1)(b)ibid note 7

[14] Section 3 of the Dishonoured Cheques (Offences) Act

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