Section 8 of the negotiable instruments act, 1881 mentions the punishment for cheque bounce cases in india. How to invest in the stock market for beginners duration. Alterations on instrument other than date field alterationcorrection on instruments are prohibited under cheque truncation system. An nsf check is often referred to as a bad check, dishonored check, bounced check, cold check, rubber check. Dishonour of negotiable instrument a promissory note, bill of exchange or cheque is said to be dishonoured by nonpayment when the maker of the note, acceptor of the bill or drawee of the cheque. Cases of cheque bounce are not uncommon, in most of the transactions be it repayment of loan or payment of fees for business purpose, payments are made by cheque. Private ltd in view of the takeover and merger of schemes of pnb mutual fund. Arun kumar goenka vs pnb mutual fund on 21 april, 2008. Thus dishonoring of a cheque means the refusal by the bank to pay the amount of cheque to the payee. The dishonour of a cheque due to stopped payment is also covered under section 8 of the ni act.
Cheques are issued for the reason of securing proof of payment. If the bank refuses to make payment of amount then cheque is said to be dishonoured. Cheque bouncing dishonour of cheque explained in hindi duration. The sum that is directed to be paid should be distinctly expressed in the instrument. Issuing of a cheque and its dishonour is not an offence. A cheque is said to be honoured, if the banks give the amount to the payee.
Dishonour of a cheque and legal recourse ipleaders. Dishonoured cheques and the reason for their being dishonoured. You cannot take legal recourse if the cheque was issued as a gift, donation, or any other obligation that is not legally enforceable or if the validity of cheque is over issued more than three months ago. Dishonour of cheques a cheque is one form of a bill of exchange. It is used for making payments without any need to carry cash. The drawer should have failed to make payment within 15 days of the receipt of notice. The template sidebar with collapsible lists is being considered for merging. That it exceeds the amount arranged to be paid from that account by an agreement made with that bank. Issuance of a cheque towards repayment of a loan or fulfillment of an obligation was primarily a civil matter object of s. The payee can prosecute the drawer of the cheque only when the cheque has been issued towards the discharge of liability or debt by the drawer. Negotiable instrument is a convenient and safe means of transferring money, and provides a permanent record and receipt for its transaction. A cheque, or check is a document that orders a bank to pay a specific amount of money from a. The great hardship is caused to a person if a cheque issued in his favour is dishonoured due to insufficiency of funds in the account of the drawer of the cheque.
A dishonoured cheque cannot be redeemed for its value and is worthless. In other words, dishonour of cheque is a condition in which bank refuses to pay the amount of cheque to the payee. Sep 20, 2016 cheque bounce or cheque dishonour mandatory legal process i. Intrusion into the micr area can cause problems when the cheque runs through the. 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. 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. 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 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. General for the purpose of adducing evidence to prove the fact of dishonour of cheque on behalf of a complainant i. A dishonoured cheque is a cheque that is not credited by a bank under numerous of reasons.
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. The dishonour of cheque is a criminal offence and is punishable by imprisonment up to two. Apr 30, 2015 f civil liability in dishonour of cheque. Dishonour of cheque case study solution case study analysis. Amount drawee bank reasons for return along with date 110268 31.
A cheque is an order written by a drawer to a banker to pay on demand a specific sum of money to the parson or persons named as payee on the cheque. 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. Jan 15, 2016 a dishonored cheque is a cheque that is not credited by the bank for numerous reasons including. Cheque dishonour archives supreme court of india judgements.
Nonsufficient funds nsf is a term used in the banking industry to indicate that a cheque cannot be honored because insufficient funds are available in the account on which the instrument was drawn. While, if the bank refuses to pay the amount to the payee, the cheque is said to be dishonoured. Cheque is the most common mode of making the payment. 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. 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. Following are the some important reasons for dishonoring a cheque. Cheque dishonour also called cheque bounce is a criminal offence. Reasons may be such as insufficient funds in the account, signature mismatch etc. If your cheque is dishonoured due to any reason you are in. On presenting a cheque, the bank should pay the stated amount from drawers account to the payee. A dishonoured cheque is a cheque that is not credited by the bank for numerous reasons including. 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. Jan 21, 2015 cheque bouncing dishonour of cheque explained in hindi duration. A banker may dishonour a cheque for various reasons and the.
Generally, in case of dishonour of cheque, the payee or holder in due course, as the case may be, has two remedies. Act may sound in a criminal prosecution rests on the holding that a cheque of such nature drawn and delivered constitutes a promise to pay a time barred debt within section 253 of the contract act. Dishonoured cheques and the reason for their being dishonoured a cheque is said to be dishonoured if the bank refuses to pay the amount of cheque. Dishonor of cheque and reasons for dishonor accounting. Dishonour of cheques section 8 of negotiable instruments act. If the cheque was dishonoured, it was physically returned.
Cheque bounce or cheque dishonour mandatory legal process i. A stepbystep guide for legal recourse the dishonour of cheque is a criminal offence and is punishable by imprisonment up. In fact, when the drawer draws the cheque without following all the rules of issuing cheque or when heshe draws the cheque exceeding the bank balance then the bank dishonors the cheque. A banks failure to honor a valid negotiable instrument such as a cheque or draft that has been presented to it for payment. Sep 27, 20 when dishonour of a cheque is an offence 9 7. May 06, 20 this is what gujarat high court verdict is just as dishonour of a cheque on the ground that the account has been closed is a dishonour falling in the first contingency referred to in section 8 of negotiable instrument act, so also dishonour on the ground that the signatures do not match or that the image is not found, which too. 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. May 24, 2016 it is the duty of the bank to honor the cheque of his clients if complete or valid in all respects. Section 8 makes dishonour of cheque in certain cases an offence. Cheque dishonour negotiable instruments act, 1881 section 9 section 9 of the act is an example of reverse onus clause and therefore once the. Apr 24, 20 dishonour of cheque proceedings in the complaint alleging offence under section 8 cannot be initiated against legal heirs of the person who had issued the cheque. However, the bank can refuse to make the payment of a cheque in the following cases.
But if the bank refuses to pay the amount mentioned on the cheque to the payee, it is called as dishonour of a cheque. There could be many reasons for dishonour of cheque. Negotiable instruments act, 1881 on dishonour of security cheques. A cheque is ordinarily paid by the drawee bank if it is in perfect order. Below are few specific reasons of dishonor of cheque, you must be well familiar with all of them. 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. Introduction a promissory note, bill of exchange or cheque is said to be dishonoured by nonpayment when the maker of the note, acceptor of the bill or drawee of the cheque makes default in payment upon being duly required to pay the same. Any demand made after the dishonour of cheque will constitute a notice. May 24, 2008 give 4 reasons why a bank would dishonour a cheque. These reasons stand as valid grounds for action against the drawer of the cheque. It is a condition in which the bank does not pay the amount of the cheque to the payee.
Whenever the cheque is dishonoured, the drawee bank instantly issues a cheque return memo to the payee banker specifying the reasons for. Dishonor of cheque may occur generally due to the following reasons to. Dishonouring of a bank cheque punjab judicial academy. If the cheque is being dishonored again, the payee has the right to prosecute the drawer legally for the dishonour of the cheque. What is the meaning of reason 20 for cheque dishonoured. Mar 01, 20 cheque dishonour under section 8 of negotiable instruments act. What are the various reasons for dishonor of cheques. Dishonour of cheque free download as powerpoint presentation. Advantages objectives importance cause of popularity of. It is payable immediately on demand, without any days of grace. If the bank pays the specific amount to the payee, the cheque is honoured.
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