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Understanding 'Refer to Drawer' in Cheque Law

In the world of banking and finance, few phrases strike fear into the heart of a cheque issuer like 'refer to drawer'. If you've ever received a returned cheque stamped with these words, you might wonder: what does it legally mean? This term is central to cheque dishonour cases under India's Negotiable Instruments Act, 1881 (NI Act), particularly Section 138. It often signals insufficient funds in the drawer's account, potentially triggering criminal liability.

This blog post breaks down the legal term 'refer to drawer', drawing from key court judgments. We'll explore its banking origins, judicial interpretations, and practical implications. Note: This is general information based on case law and not specific legal advice. Consult a lawyer for your situation, as outcomes vary by facts.

What Does 'Refer to Drawer' Actually Mean?

'Refer to drawer' is a standard banking endorsement when a cheque is dishonoured. Courts consistently hold that it implies insufficiency of funds or the drawer's failure to ensure payment.

• In banking parlance, this phrase is used when there's want of funds in the drawer's account. As one court observed: the term 'refer to drawer' is generally used for returning the cheques for want of funds in the drawer's account Syed Rasool and Sons VS Aildas and Company - 1992 Supreme(AP) 517.


• It's not limited to explicit 'insufficient funds' memos. 'Refer to drawer' covers scenarios where the drawer hasn't arranged funds, making it a trigger for Section 138 NI Act proceedings Rajesh VS Rajbir Singh - 2013 Supreme(SC) 362.

This interpretation aligns with the legislative intent of Section 138: to punish cheque bouncing due to insufficient funds or exceeding arranged limits, promoting cheque credibility as a payment tool.

Banking Practice vs. Legal Effect

Banks use coded reasons for returns:
- Funds insufficient
- Refer to drawer
- Account closed (still actionable if issued believing account open) K.S.RAJESH Vs K.M.BASHEER - 2017 Supreme(Online)(KER) 41609

Judges take judicial notice that 'refer to drawer' typically means no funds available. A strict literal reading would undermine the law's purpose DADA SILK MILLS VS INDIAN OVERSEAS BANK AND BANKING COMPANY,surat - 1994 Supreme(Guj) 188.

Legal Implications Under Section 138 NI Act

Section 138 makes dishonour due to insufficiency of funds a punishable offence: up to 2 years imprisonment, fine up to twice the cheque amount, or both. The process requires:
1. Cheque presentation within validity.
2. Dishonour memo (e.g., 'refer to drawer').
3. Demand notice within 30 days.
4. Non-payment within 15 days of notice receipt.

'Refer to drawer' satisfies the 'insufficiency' element. Courts presume the cheque was for a legally enforceable debt under Section 139, shifting rebuttal burden to the drawer Chand Rattan Newar VS Syam Rattan Newar - 2000 Supreme(P&H) 885.

• In one case, cheques returned 'refer to drawer' led to conviction; the accused's misuse defence failed due to lack of evidence Kiran Rameshlal Bhandari VS Narayan Purushottam Sarada - 2020 Supreme(Bom) 1046.


• Even post-amendment, prior-issued cheques dishonoured with this endorsement commit the offence V. S. Krishnan VS V. S. Narayanan - 1989 Supreme(Mad) 629.

Presumption and Rebuttal

Once dishonoured with 'refer to drawer', Section 139 presumes validity. The drawer must prove:
- No debt/liability.
- Cheque as security (not blank cheque).
- Account issues beyond control.

Failure leads to conviction, as in cases where defences like 'misuse' or 'security' lacked proof Kiran Rameshlal Bhandari VS Narayan Purushottam Sarada - 2020 Supreme(Bom) 1046.

Key Court Interpretations and Case Studies

Indian courts have clarified 'refer to drawer' across High Courts and Supreme Court precedents.

Supreme Court and High Court Rulings

• Banking Custom Recognition: In banking parlance, the term 'refer to the drawer' is used for the purposes of indicating want of funds Syed Rasool and Sons VS Aildas and Company - 1992 Supreme(AP) 517. Courts reject narrow views limiting it to specific reasons DADA SILK MILLS VS INDIAN OVERSEAS BANK AND BANKING COMPANY,surat - 1994 Supreme(Guj) 188.


• Multiple Presentations: Subsequent dishonours (e.g., again 'refer to drawer') create fresh causes if within validity, but only one complaint per presentation sequence JOGINDER SINGH GALTA VS RAKESH KUMAR - 1997 Supreme(HP) 355.

Notable Cases

| Case ID | Key Holding |
|---------|-------------|
| Rajesh VS Rajbir Singh - 2013 Supreme(SC) 362 | Tribunal awarded compensation; 'refer to drawer' triggered funeral expenses head, but focused on salary revisions. Courts note frugality in such awards. |
| Kiran Rameshlal Bhandari VS Narayan Purushottam Sarada - 2020 Supreme(Bom) 1046 | Accused convicted; complainant proved debt, signatures admitted. 'Refer to drawer' confirmed insufficiency. |
| K.S.RAJESH Vs K.M.BASHEER - 2017 Supreme(Online)(KER) 41609 | Conviction upheld despite 'account closed'; 'refer to drawer' variants fall under Section 138 if intent present. |
| Chand Rattan Newar VS Syam Rattan Newar - 2000 Supreme(P&H) 885 | Presumption under Sec 139; 'refer to drawer' means prosecution opportunity for drawer. |
| Syed Rasool and Sons VS Aildas and Company - 1992 Supreme(AP) 517 | Dismissed quash petitions; 'refer to drawer' = want of funds per custom; one cause per cheque. |

These cases show consistency: 'refer to drawer' activates Section 138 machinery.

Defences and Common Misconceptions

Drawers often argue:
- Not insufficiency: Courts disagree; banking endorsement suffices DADA SILK MILLS VS INDIAN OVERSEAS BANK AND BANKING COMPANY,surat - 1994 Supreme(Guj) 188.
- No notice: Must prove non-receipt; deemed service under Evidence Act Sec 114 Manjulaben H. Pandya VS Gurumukhdas Bhagwandas Vaswani - 2022 Supreme(Guj) 1560.
- Security cheque: Rebut presumption with evidence; mere claim fails Kiran Rameshlal Bhandari VS Narayan Purushottam Sarada - 2020 Supreme(Bom) 1046.

Vicarious Liability (Companies): Directors/signatories liable only if 'in charge' under Sec 141; drawer is company, not signatory alone Gurudatta Sugars Marketing Pvt. Ltd. VS Prithviraj Sayajirao Deshmukh - 2024 5 Supreme 622.

Practical Advice for Drawer and Payee

For Payees (Victims):
- Present cheque promptly.
- Send demand notice clearly stating amount (soft language OK if intent clear) Ramkrit Jadav VS Samir Kumar Das - 2023 Supreme(Cal) 1372.
- File complaint within 30 days of payment deadline.

For Drawers:
- Ensure funds before issuing.
- Respond to notice with payment or valid defence.
- Avoid repeated bounces; multiple valid presentations risky JOGINDER SINGH GALTA VS RAKESH KUMAR - 1997 Supreme(HP) 355.

Conclusion and Key Takeaways

'Refer to drawer' is more than a memo—it's a legal red flag under NI Act Section 138, typically meaning insufficient funds and inviting prosecution. Courts prioritize cheque reliability, presuming debt validity unless rebutted.

Key Takeaways:
- Banking term = Legal trigger: Implies no funds Syed Rasool and Sons VS Aildas and Company - 1992 Supreme(AP) 517.
- Presumption favours payee: Sec 139 shifts burden Chand Rattan Newar VS Syam Rattan Newar - 2000 Supreme(P&H) 885.
- Strict but fair: Opportunity to pay post-notice.
- Company cases: Signatories not automatic 'drawers' Gurudatta Sugars Marketing Pvt. Ltd. VS Prithviraj Sayajirao Deshmukh - 2024 5 Supreme 622.

In most cases, this endorsement leads to liability unless strong defences proven. Digital payments rise, but cheques persist—handle responsibly.

Disclaimer: Legal outcomes depend on specifics. This post summarizes judgments like Rajesh VS Rajbir Singh - 2013 Supreme(SC) 362 Kiran Rameshlal Bhandari VS Narayan Purushottam Sarada - 2020 Supreme(Bom) 1046; seek professional advice. Not substitutes for court.