Until August 2025, a business owed money on a bounced cheque in Sri Lanka faced an awkward choice. It could sue the drawer civilly on the cheque as a bill of exchange, or it could try to have the matter treated as a criminal offence under the Debt Recovery (Special Provisions) Act No. 2 of 1990, which required proving that the drawer had written the cheque intending it to be dishonoured from the outset. That second route was often difficult, since intention is not easy to show from a returned instrument alone. The Bills of Exchange (Amendment) Act No. 13 of 2025 changed the picture by writing a purpose-built offence directly into the Bills of Exchange Ordinance, with defined timelines and a fixed penalty. For a business chasing a commercial debt in Sri Lanka, whether the underlying obligation is an unpaid invoice, a loan, or a dishonoured cheque, several statutes now interact, and choosing the right one shapes how quickly the debt actually comes back.
The 2025 reform: a dedicated offence for a dishonoured cheque
Sections 82A to 82F, inserted into the Bills of Exchange Ordinance (Chapter 82, originally enacted as Ordinance No. 25 of 1927) by the Bills of Exchange (Amendment) Act No. 13 of 2025, certified on 15 August 2025, give a payee a considerably clearer route than existed before.
Under section 82A, a drawer is deemed to have committed an offence where a cheque issued for a debt or other liability is returned unpaid because the account held insufficient funds, exceeded an arranged limit, was closed, or because payment was countermanded without a legitimate reason. Three conditions have to be met first. The cheque must have been presented to the drawee bank within six months of its date or its stated validity period, whichever comes first. The payee must make a written demand for payment within ninety days of learning from the bank that the cheque was returned. And the drawer must fail to pay within ninety days of that demand.
Section 82B then gives the payee thirty days from the expiry of that second ninety-day period to institute legal action. Section 82C fixes jurisdiction in the Magistrate's Court, either where the cheque was deposited for collection or where the branch holding the drawer's account is located. A conviction carries a fine that can extend to the amount of the cheque, imprisonment for a term of up to two years, or both.
Section 82F extends the offence to directors, partners and other officers of a company or firm that issues a dishonoured cheque, though it gives an officer a defence where the offence was committed without their knowledge or where they exercised due diligence to prevent it. Because the regime is new, exactly how it sits alongside the older provision in the Debt Recovery Act, discussed below, is a question the courts have not yet had much occasion to settle, and the point is worth confirming against the current consolidated text before it is relied on in a specific matter.
How it worked before
Before the 2025 amendment, a payee wanting to treat a dishonoured cheque as a criminal matter generally relied on section 25 of the Debt Recovery (Special Provisions) Act No. 2 of 1990, brought in the Magistrate's Court. That provision required the complainant to show the drawer had written the cheque with the intention that it be dishonoured, a state of mind considerably harder to establish than the more mechanical conditions now set out in section 82A. Prosecutions under section 25 have also commonly been filed together with a Penal Code charge of cheating, reflecting the same underlying complaint that the drawer never intended to honour the instrument. How Sri Lanka's court system works sets out how the Magistrate's Courts sit within the wider structure.
The civil route stays open
None of this closes off the ordinary civil claim. A cheque is a bill of exchange, and its dishonour by non-payment gives the holder an immediate right of action against the drawer for the amount of the cheque, independent of any criminal complaint. A creditor does not have to choose between the two. A civil claim and a criminal complaint can run side by side, since they serve different purposes and different standards of proof.
Because a dishonoured cheque is a liquidated sum supported by a written instrument, it is generally well suited to summary procedure under Chapter LIII of the Civil Procedure Code, described below, rather than an ordinary action that would otherwise run its full course through pleadings and trial.
An ordinary trade debt: summary procedure instead of a full trial
Most commercial debts are not cheques. An unpaid invoice, a loan on a written agreement, or a sum due on a bond can usually still be recovered faster than an ordinary civil action allows. Chapter LIII of the Civil Procedure Code (Chapter 101) sets out a summary procedure for a claim that is liquidated and supported by documentary proof, on the footing that a defendant with no real answer to a clear paper claim should not be entitled to drag the case through a full trial as of right.
A defendant served under this procedure has to apply for leave to appear and defend, supported by an affidavit that discloses a defence with some substance. Where the court is not satisfied that a genuine defence exists, judgment follows without the case ever reaching trial. Where it is, the action proceeds much as an ordinary one would. The practical effect is to put the burden of showing there is something worth arguing about onto the party who owes the money, rather than making the creditor prove the obvious at a full hearing.
Choosing a forum: small claims, the District Court, or the Commercial High Court
Where an action is filed depends on its size and character.
- Small claims. The Small Claims Courts' Procedure Act No. 33 of 2022 created Small Claims Courts for actions up to a value fixed under the Judicature Act, currently Rs. 1,500,000 excluding interest, though the Minister may revise that figure by Gazette. A Small Claims Court cannot, however, hear an action brought under Chapter LIII or any other written law with special provisions for the recovery of money, even where the value would otherwise qualify, so a creditor who wants the benefit of summary procedure has to go to the ordinary courts instead.
- The District Court. A District Court has general original civil jurisdiction over matters not assigned elsewhere, and is the ordinary forum for a commercial debt claim of any size that is not otherwise diverted to a specialised court or procedure.
- The Commercial High Court. Commercial disputes above a monetary threshold set under the High Court of the Provinces (Special Provisions) Act No. 10 of 1996 fall within the Commercial High Court of Colombo. That threshold has been revised more than once since 1996, so the current figure should be checked against the court's own practice directions before a claim is filed, rather than assumed from an earlier one.
When the debtor's obligation runs to a bank
Two further statutes apply specifically to lending rather than trade debt, and are worth distinguishing from the general routes above.
The Debt Recovery (Special Provisions) Act No. 2 of 1990 lets a lending institution recover a debt through a dedicated procedure in the District Court, provided the principal sum lent was not less than Rs. 150,000, a threshold set by the Act's 1994 amendment. The plaint is accompanied by an affidavit that the sum is justly due, and the procedure again shifts the practical burden onto a defendant who wants to contest it.
The Recovery of Loans by Banks (Special Provisions) Act No. 4 of 1990 goes further still for a bank holding a mortgage over property as security. It allows the bank's board to resolve to sell the mortgaged property by public auction, known as parate execution, without first obtaining a court order. The Act was amended as recently as 8 May 2024, by Act No. 26 of 2024, and its use has also been shaped by Supreme Court decisions limiting a bank's ability to sell property belonging to a guarantor rather than the principal borrower. A business extending credit against a mortgage, or standing as a guarantor for one, should treat this route as materially different from an ordinary civil claim, since it can proceed without the debtor ever appearing before a judge.
Do not let the claim go stale
Whatever route is available, it is only available for a limited time. Section 6 of the Prescription Ordinance requires that an action on a written promise, contract, bill of exchange or promissory note be brought within six years of the breach, or of the date the instrument fell due. A debt owed on an unwritten or informal basis is generally treated more strictly still. Litigation readiness for Sri Lankan businesses covers why this calendar deserves attention from the moment a debt starts to look doubtful, rather than once a business has decided to sue.
A written acknowledgement of the debt by the debtor restarts the prescription period from the date of the acknowledgement, which is one reason a creditor negotiating a payment plan should get any partial payment or promise to pay recorded in writing rather than left as a verbal understanding.
Practical points
- Work out which regime fits a dishonoured cheque. The section 82A offence, the older Debt Recovery Act provision, and a plain civil claim on the cheque are not mutually exclusive, but they carry different proof requirements and different timelines, and the ninety-day and thirty-day periods in section 82A run whether or not a business is watching for them.
- Keep the paperwork a summary claim needs. Chapter LIII procedure and the Debt Recovery Act procedure both depend on a clean paper trail: the signed agreement, the cheque, the invoice acknowledged by the debtor, and an affidavit that can honestly say the sum is justly due.
- Check the current thresholds before filing. The Small Claims Court limit, the Commercial High Court floor, and the minimum loan amount under the Debt Recovery Act have all moved over time and can move again by Gazette or amendment.
- Diarise the prescription date the moment a debt looks doubtful. Waiting for a relationship to sour before checking the calendar is one of the most common ways a good claim is lost for a reason that has nothing to do with its merits.
- Treat parate execution as its own track. Where a mortgage is in place, a bank's rights under the Recovery of Loans by Banks Act follow a different procedure entirely, and a guarantor's position under it is not the same as a principal borrower's.
The 2025 amendment closes a real gap in how a bounced cheque was treated, but it adds a statute rather than simplifying the field. A creditor with several tools available should still work out, before the first demand letter goes out, which one fits the debt in front of them, since that choice will decide which court hears the case, how long it takes to get there, and what has to be proven along the way.
