Cheque Dishonor Suit and remedy: A Legal Review and Context

Faijul Islam : You have lent money to someone for his needs. While giving the money, he said, I did not have the proof of the money that I gave you. I need some proof. He said to the one who gave the loan, “Brother, this is my check.” I signed this cheque to you in blank. Now I believe.

Again you are doing business transactions. Signed the blank check from the customer to settle the balance.

Now I have the cheque of the person who had lent money or who is thinking of not paying the remaining goods due to business reasons. So I cashed the check. Then went to the bank and gave the check at the bank counter. The bank officer told you that there is no money in the account. You said, then write it down. Bank officer, gave you a written memo. In which it is written, the amount of money is less. You came with the memo with the cheque. In the case of returning the memo with this cheque, the check is dishonoured.

Go to the bank and deposit the check at the counter for withdrawal. The bank officer will give you the amount of money that you have given the cheque of the account or account, if there is money in that account, and if the signature of the cheque is correct. So, you don’t need to dishonor your cheque.

Cheque is a negotiable instrument. A negotiable instrument is a piece of paper that pays a certain amount of money to a person and is transferred from person to person only by assignment. In this post, we will go into detail about what you can do if a check is dishonored or bounced.

What is cheque dishonor?  

Cheqe dishonor case Cheque are used in daily life to settle debts or obligations. However, in many cases, the payee of the check is unable to pay the payee if the amount stated on the check is not in the issuer’s (cheque drawer’s) account. The cheque is rejected by the bank for insufficient funds. This phenomenon is known as check dishonor.

Why can the cheque be dishonored?

When and for what reasons can a check be dishonored?

1. If you are short of funds or money as a bank. And when the stated amount of the cheque is less than the stated amount of your bank.

2. If the signature of the person who issued the cheque does not match.

3. If there is a difference between the amount and the amount mentioned in the cheque.

4. When the cheque expires.

5. If the cheque is not completed correctly.

6. Rubbing the cheque or altering the cheque

If the cheque is formally deposited within 6 months from the date of issue and the bank rejects the check due to lack of funds in the bank account, the cheque will not be deliverable. The bank will issue a document explaining why you have dishonored.

In this case if you go to the bank within 6 months from the date of issue of the cheque and redeem the cheque, you will find that the cheque has not been dishonored but returned, and you will have an opportunity to take legal action under this Act i.e. cheque dishonor case.

That is, the cheque must be deposited in the bank for encashment within your specified period, i.e. within 6 months from the date of issue of the cheque.

Subsequently due to insufficient funds in the bank account, you must give legal notice to the check drawer for payment within 30 days of dishonor of the cheque.

If the payee of the check does not pay the amount stated on the check to the payee within 30 days of receiving the notice, the payee of the cheque may file a proceeding.

Remedies in checque fraud and check dishonor cases

Sections 138, 140 and 141 of the Negotiable Instruments Act (NI Act) provide protection against loss if a cheque is rejected or non-payment due to insufficient funds i.e. remedy in cheque fraud.

How to give notice to the party?

If there are insufficient funds in your bank account and your check is dishonoured, you must give a statutory notice to the check drawer and make payment within 30 days.

Legal notice can be given in three ways

Delivers notice directly to the recipient of the notice.

Gives notice by post to the address of the cheque drawer and to the address of last residence with acknowledgment of receipt.

Finally, a national Bengali daily publishes the notice in the form of a circular. Any one of these three methods should be followed.

Procedure for Filing a Case

Certain conditions must be fulfilled before filing a case. First, the cheque must be presented to the bank for payment within the period. Bank checks have a validity of six months from the date of issue. After that the cheque becomes void i.e. loses its validity. Secondly, within 30 days of receiving information from the bank regarding cheque dishonor, the issuer of the cheque must send a written demand notice for payment of the cheque. The payee or holder of the cheque, as the case may be, shall give this notice. If the issuer of the check fails to pay the value of the check within 30 days of receiving the notice, he will be deemed to have committed an offense punishable under Section 138 of the Negotiable Instruments Act. Thirdly, the case must be filed in the court within 30 days from the date of commission of the offence.

Punishment in Cheque Dishonor Case

The Negotiable Instruments Act provides for imprisonment for a term up to one year or a fine up to three times the amount stated in the check or both for the offense of dishonoring a bank check due to insufficient funds. This provision is made in the law to encourage payment of loans or other liabilities by cheque instead of cash.

Appeal

There is scope for appeal against the sentence awarded by the court. At least 50 percent of the amount mentioned in the cheque should be submitted to the court which has awarded the penalty and appeal. In the courts of the country, there are frequent cases of cheque fraud. Punishment is also being done. So, beware! The days of cheating with bank cheques are over.

Author: Faijul Islam from Chittagong University Law Department