Sep 27, 20 when dishonour of a cheque is an offence 9 7. The law only takes cognizance of the fact that the payment has not been forthcoming and it matters little that any of the manifold reasons may have caused that situation38. Dishonour of cheque means the refusal of drawee bank to pay its customers cheque. Dishonour of a negotiable instrument legal steps to take. The payee bank while returning the cheque gives reason for dishnour. The list of reasons, for which a cheque could be returned unpaid by a bank, is given below this list is only illustrative and not exhaustive. In other words, dishonour of cheque is a condition in which bank refuses to pay the amount of cheque to the payee. Dishonour of cheque its consequences under negotiable. Issuing of a cheque and its dishonour is not an offence.
Section 8 of the negotiable instrument act, 1881 was introduced in chapter xvii of the act which was inserted by section 4 of the banking, public financial institutions and the negotiable instruments laws amendment act, 1988. A person suffers a lot if a cheque issued in his favour is dishonoured due to the insufficiency of funds in the account of the drawer of the cheque. Mar 02, 2017 well, the reason of the cheque dishonoured, cheque bounce or return is categorised in the form of codes or return code on the basis of various aspect or reasons of dishonour of cheque under the dishonour of cheque section 8 of the negotiable i. The cheque may not have been cleared for one or more of the following reasons. This decision of the court clarifies a very contentious issue pertaining to the offence of dishonour of cheques under section 8 of the act. It is used by individuals, businesses, corporate and others to transact for making and receiving payment. Some times stop payment instruction is also ticked.
A cheque check becomes a bounced cheque when, on being presented to the bank, it is returned by the bank due to there being a defect in it. These reasons stand as valid grounds for action against the drawer of the cheque. If the bank pays the specific amount to the payee, the cheque is honoured. Filing procedure of cheque bounce case a cheque bounce is when an unpaid cheque is returned back by the bank, also known as dishonour of cheque. How to invest in the stock market for beginners duration. You will need to send this legal notice for cheque dishonor by giving a 30 days time to the cheque holder. Dishonour of cheque free download as powerpoint presentation.
Prior to this legislation, the provision of the english negotiable instrument act was in force in india. A dishonoured cheque is a cheque that is not credited by a bank under numerous of reasons. Reasons may be such as insufficient funds in the account, signature mismatch etc. Reason for return 0103 funds 01 funds insufficient 02 exceeds arrangement 03 effects not cleared, present again. Cheque dishonour also called cheque bounce is a criminal offence. If the cheques dishonoured for the reasons specified above in case of an account include both cheques of the value of rs. May 24, 2016 it is the duty of the bank to honor the cheque of his clients if complete or valid in all respects. Apr 24, 20 2005 2 dishonour of cheque reporter dcr 0169. When cheque is presented for payment, the bank should make the payment to the payee as mentioned in the cheque if everything is in order. This blog post covers areas like the importance of cheque, dishonor of a cheque and its remedies and the legal recourse available with the help of certain laws in india. After each dishonor you must have to send a legal notice for cheque dishonour by an advocate.
The complaint or case of the dishonour of cheque is filed at a place where the cheque was submitted for honouring, thus, the drawer is the one who files a cheque bounce case. Most often it mentions reasons such as exceeds the arrangement or refer to drawer. Below are few specific reasons of dishonor of cheque, you must be well familiar with all of them. According to section 8 of the act, the dishonour of cheque is a criminal offence and is punishable by imprisonment up to two years or with monetary penalty or with both. But if the bank refuses to pay the amount mentioned on the cheque to the payee, it is called as dishonour of a cheque. Dishonour of a cheque and legal recourse ipleaders. A dishonored cheque is a cheque that is not credited by the bank for numerous reasons including. Critical study of dishonour of cheques under negotiable. Dishonour of cheque section 8 of the negotiable instruments act. Before 1988 there being no effective legal provision to restrain people from issuing cheques without having sufficient funds in their account or any stringent provision to punish them in the vent of such cheque not being honoured by their bankers and returned unpaid. Scribd is the worlds largest social reading and publishing site. Format of notice of demand under section 8 of the ni act for dishonour of cheque. The case for the dishonour of cheque can be filed not only against the individual but also against any organisation dishonouring the cheque. Cheque is a negotiable instrument used to make payment in day to day business transaction minimizing the risk and possibility of loss.
Dishonour of cheque its consequences under negotiable instruments act as amended upto when a cheque is presented in the concerned bank by the drawee within the stipulated time, within the three months from the date of issue the drawee bank issue check return memo to the payee mentioning the reason for non payment. Dishonouring of a cheque us 8 a cheque is a type of bill of exchange and is a negotiable instrument. The other valid reasons for a cheque dishonour is that the account on which the cheque has been issued is closed or a stop payment instruction has been given by the drawer of the cheque to the bank. Possible reasons why the bill is dishonoured by nonpayment. A dishonoured cheque is a cheque that is not credited by the bank for numerous reasons including. The holder needs to inform the party of such a dishonour and them give him time of fifteen days to make good the liability. Definition the negotiable instruments act, 1881 makes the dishonour of cheques a criminal offence. Dishonour of cheque given as security whether offence under.
The paying branch should return dishonored cheques presented through clearing houses. A stepbystep guide for legal recourse the dishonour of cheque is a criminal offence and is punishable by imprisonment up to two years or with monetary penalty or with both. In the event of dishonour of cheque against which immediate credit was provided, interest shall be recoverable from the customer for the period the bank remained out of funds at the rate applicable for clean overdraft limits sanctioned for individual customers. Cheque bounce notice format format download free legal. The cause of action to file a complaint accrues to the complainant, payee, holder in due course if. Section 8 of nia provides that the dishonour of the cheques for the reasons. Apart from that, there are some few general reasons for dishonour of cheque which are as follows. Dishonour of cheque cheque bouncing sample questions. Cheque bounce can eventuate because of a lot of reasons, for instance, due to insufficiency of funds in the account of the drawer and many other reasons. Dishonour of cheque is governed by the provisions of n i act, 1881 whereas the dishonor of electronic fund transfer for insufficiency of funds in the account is governed by the section 25 of payment and settlement system act, 2007. Of course on dishonour of cheques there is a civil liability accrued.
The banker should stop the payment, on receipt of the notice of assignment signed by the customer of the credit balance in his account. Dec 11, 2008 dishonour of a cheque on the ground that the account has been closed by the drawer of the cheque does not constitute an offence under section 8 as the said section, contemplates dishonour of a cheque either for want of funds or for exceeding the arrangements made. Whenever a cheque given to a business bounces, the bank will send notice to the business that the customer debtors cheque was dishonoured. Moreover, the payee has to give a notice to the drawer within 30 days from the date of receiving cheque return memo from the bank. If the bank refuses to make payment of amount then cheque is said to be dishonoured.
Jul 11, 2015 the language of this legal provision is very clear. Any demand made after the dishonour of cheque will constitute a notice. This video explains the concept of dishonour of cheques. It is seen that once the cheque has been drawn and issued to the payee and the payee has presented the cheque and thereafter, if any instructions are issued to the bank for nonpayment and the cheque is returned to the payee with such an endorsement, it amounts to dishonour of cheque and it comes within the meaning of section 8. Dishonor of cheque may occur generally due to the following reasons to.
It is also noteworthy that section 8 while making dishonour of a cheque an offence punishable with imprisonment and fine, also provides for safeguards to protect drawers of such instruments where dishonour may take place for reasons other than those arising out. A cheque is ordinarily paid by the drawee bank if it is in perfect order. A banks failure to honor a valid negotiable instrument such as a cheque or draft that has been presented to it for payment. The amount mentioned in the cheque exceeding the amount which has been arranged to be drawn from the account by virtue of a prior arrangement. With a view to protect drawee of the cheque need was felt that dishonour of cheque he made punishable offence. It has been repeatedly held by courts that manifest dishonest intention of the drawer resulting in dishonour of the cheque would lead to prosecution under section 8 negotiable instruments act regardless of the actual ground of dishonour. Advantages objectives importance cause of popularity. Cheque bouncing dishonour of cheque explained in hindi duration. There could be many reasons for dishonour of cheque. What is the meaning of reason 20 for cheque dishonoured. Where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or.
Apr 30, 2015 f civil liability in dishonour of cheque. Policy for dealing with dishonour of cheques including. However, if you file a civil or criminal case against you, the ni act, 1881 would apply. Generally, in case of dishonour of cheque, the payee or holder in due course, as the case may be, has two remedies. If the banker feels suspicious that the trustee wants to use the amount of the cheque for his personal use, he must stop payment. If you had sufficient balance in the account or if you have an overdraft facility for the account or in case some cheques was under clearance for realisation of money into your account, then you have valid reasons to complain about the dishonour of cheque. Dealing with frequent dishonour of cheques of value of less than rs. Thus, negotiable instrument means, a document transferable by. Dishonour of cheques ecs valuing less than 1 crore in the event of dishonour of cheque ecs mandate valuing of less than rs. A dishonoured cheque cannot be redeemed for its value and is. Dec 04, 2017 meaning of cheque different types of cheque. To bring a criminal prosecution under section 8 a civil suit for recovery of money as well as a complaint under section 8 is maintainable.
A banker may dishonour a cheque for various reasons and the reasons for such. Sep 20, 2016 cheque bounce or cheque dishonour mandatory legal process i. Additionally, you can also download other legal forms related to banking finance laws here. Jan 21, 2016 the payee has an option to resubmit the cheque within three months of the date specified on the cheque after fulfilling the reason for the dishonour of cheque. Cheque is the most common mode of making the payment. A, in business law from nujs, kolkata discusses legal steps to take when a negotiable instrument is dishonoured. If the cheque had been issued as a security, and if such cheque bounces, no offence is made out under section 8 of the negotiable instruments act. Jan 21, 2015 cheque bouncing dishonour of cheque explained in hindi duration. Cheque dishonour under section 8 of negotiable instruments act.
Pdf this decision deals with a number of important aspects of the law. A cheque is said to be honoured, if the banks give the amount to the payee. The biggest danger in accepting a cheque is that the person writing it may not have enough money in the bank to cover it. Complete list of reasons for which a cheque can be. Cheque bounce charges punishment and penalty related to. Section 8 makes dishonour of cheque in certain cases an offence. The offence is when the drawer receives a notice from the payee and he fails to pay the dishonoured cheque amount within the grace period of 15 days that constitute an offence. Cheque collection policy and policy for dealing with. In order to duly protect the interest of its payee, holder in due course, there is an attempt to discourage dishonour of a cheque by making it an offence. Negotiable instrument is a convenient and safe means of transferring money, and provides a permanent record and receipt for its transaction. Sep 16, 2017 the apex court in a recent judgement held that any failure to include the company as an accused in the complaint, filed for dishonor of cheque section 8 of the negotiable instruments act, 1881 of dishonour of a cheque issued by a company, would be fatal to the prosecution of such company even if the complaint filed against the signatory of. Sep 15, 2016 if your cheque is dishonoured due to any reason you are in trouble at the outset, i wish to make it clear that i wont go into the details pertaining to section 8 of the negotiable instruments act ni act which comes into play whenever is a cheque is dishonoured.
Going forward, a party desirous of filing a complaint for dishonour of a cheque will only be able to file a complaint in the court having territorial jurisdiction. Section 8 of the negotiable instruments act, 1881 mentions the punishment for cheque bounce cases in india. Download free sample form document for cheque bounce notice format in word format at lawrato. However, the bank can refuse to make the payment of a cheque in the following cases. When signature is absent or the signature in the cheque does not match. Demand drafts, interest dividend warrants shall be treated on par with cheques. Advent of cheques in the market have given a new dimension to the commercial and corporate world, its time when people have preferred to carry and execute a small piece of paper called cheque than carrying the currency worth the value of cheque. When the drawee of the bill of exchange commit default in making the payment of the bill on maturity to the drawer, it is said to be dishonoured of a bill of exchange by nonpayment. What is a cheque definition, types of cheques and features. Definition the negotiable instruments act was in force in india in the year 1881. Jan 15, 2016 a dishonored cheque is a cheque that is not credited by the bank for numerous reasons including.
Gupta, dishonour of cheque, liability civil and criminal, at 15 2002. What are the various reasons for dishonor of cheques. It is used for making payments without any need to carry cash. If your cheque is dishonoured due to any reason you are in. While, if the bank refuses to pay the amount to the payee, the cheque is said to be dishonoured. Dishonouring of a bank cheque punjab judicial academy. The offence of dishonour of cheque is made out only if the cheque had been issued for the discharge of any debt or other liability. May 07, 2019 it is also noteworthy that section 8 while making dishonour of a cheque an offence punishable with imprisonment and fine, also provides for safeguards to protect drawers of such instruments where dishonour may take place for reasons other than those arising out of dishonest intentions. The dishonoured cheque is presented to the drawee bank. All these reasons of dishonour will lead to a presumption of dishonour of cheque. Complaint letter to bank manager for dishonour of your cheque.
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