Digital Payments And Decline Of Cheque Usage: Legal Challenges And Future Of Section 138
- IJLLR Journal
- Jun 8
- 2 min read
Sanjay Kumar Goyal, Research Scholar, Faculty of Law, Bhagwant University, Ajmer, Rajasthan, India
Dr. Sanjay Choudhury, Professor, Faculty of Law, Bhagwant University, Ajmer, Rajasthan, India
ABSTRACT
The rapid expansion of digital payment systems has fundamentally altered the manner in which financial transactions are conducted in India. Technological advancements, combined with regulatory initiatives and increased digital literacy, have resulted in a gradual decline in the use of traditional negotiable instruments, particularly cheques. Instruments such as the Unified Payments Interface [UPI] mobile wallets, Immediate Payment Service [IMPS] and Real-Time Gross Settlement [RTGS] have transformed payment mechanisms by offering instant, efficient and secure alternatives. This shift has significant legal implications, especially concerning the continued relevance of Section 138 of the Negotiable Instruments Act, 1881, which criminalizes cheque dishonour. While Section 138 has historically played a crucial role in reinforcing commercial trust and creditor protection, its applicability in an increasingly digital economy raises complex legal questions. This paper examines the impact of digital payments on cheque usage in India and critically analyses the challenges posed to existing legal frameworks governing financial transactions. It explores whether the deterrent rationale underlying Section 138 remains effective in the digital age and evaluates the adequacy of existing laws in addressing defaults and disputes arising from electronic payment systems. The paper further analyses judicial and regulatory responses to digital payment disputes and considers comparative international approaches. It argues that while cheque dishonour law continues to have relevance, there is a pressing need for legislative adaptation to ensure that creditor confidence and commercial certainty are preserved in modern payment systems. The study concludes that legal reform, harmonization of payment laws and development of specialised dispute resolution mechanisms are essential to address the realities of India’s evolving digital financial ecosystem.
Keywords: Digital Payments, Cheque Dishonour, Section 138, Negotiable Instruments Act; Legal Reform.
