DISHONORED CHEQUE
WHAT IS A CHEQUE?
According to sec. 6 of the Negotiable Instruments Act,1881, A "Cheque" is a bill of exchange drawn on a specific banker and not expressed to be payable otherwise than on demand and it includes the electronic image of a truncated Cheque and Cheque in the electronic form.
TYPES OF CHEQUE
· Bearer Cheque.
An unpresented check is also referred to as an outstanding check or a check that has not yet cleared the bank.
What is an outstanding Cheque?
Reasons for the dishonor of a Cheque :
Following are the dishonored Cheque reasons-1.Insufficient Funds :
In case the account of the payer doesn’t have sufficient funds in order for the bank to pay the amount mentioned on the Cheque to the payee then the Cheque will be dishonored.
2. Material Alterations :
A Cheque will be dishonored if there are any alterations on it like overwriting, corrections, missing relevant details, etc.,
3. Irregular Signature :
If the drawer’s signature on the Cheque is different than that of the specimen signature available with the bank then the Cheque will not be accepted and treated as a dishonored Cheque.
4. Post-Dated Cheque :
If the date mentioned on the Cheque is yet to come then it is known as a post-dated Cheque and these are to be presented in the bank at a later date. For instance., If a Cheque written on 30th July 2019 bears the date 16th August 2019, is a post-dated Cheque and if this is presented to the bank before the mentioned date then this Cheque will be dishonored
5. Stale Cheque :
If any Cheque is presented to the bank for payment after three months from the date mentioned on it, then it is known as a stale Cheque. After the expiry of that period, the Cheque will be dishonored.
6.‘Stop Payment’ Instruction :
If the drawer has asked the bank to stop payment and not to pay for the Cheque which is already issued, then in such cases, the bank will dishonor the Cheque.
7. Frozen Account :
In case, the court or the government has ordered that a person’s account has to be frozen then in such a case all chequeens bearing that particular account number will be dishonored by the bank.
8. Account Closed :
If the drawer has closed the account before the Cheque is presented then the bank will dishonor that particular Cheque.
So above mentioned dishonored Cheque reasons might create problems for the payee and he/ she must get another Cheque without the above-mentioned errors.
Dishonoring of Cheque – A Criminal
Offense Under S.489-F P.P.C
A dishonored Cheque is one, when presented is refused payment by the bank because of insufficient funds or because it is not in order, dishonestly issuing a Cheque is a criminal offense in Pakistan.
Dishonestly issuing a Cheque is governed by section 489-F of the Pakistan Penal Code, 1860.
According to Section.498-F P.P.C
Dishonestly issuing a Cheque:
Whoever dishonestly issues a
Cheque towards re-payment of a loan or fulfillment of an obligation which is
dishonored on presentation shall be punishable with imprisonment which may
extend to three years and with a fine unless he can establish, for which the burden of proof shall rest on him, that he had made arrangements with his bank
to ensure that the Cheque would be honored and that the bank was at fault in
not honoring the Cheque.
The offense under this section is cognizable by police, non-bailable and compoundable.
Note:
Each case has to be seen on its own
facts and circumstances.
Limitation:
The limitation period of a Cheque is" 3 months from the date" on which it was issued by the drawer.
Where is Dishonored Cheque recorded?
3 1. Upon receipt of a Cheque, it is recorded as a “Receipt” into Bank, whether or not it is actually realized.
2. When the Cheque is subsequently dishonored, it should be recorded as a “Payment” but should be recorded in the Receipts Book under the Column “Dishonor of Cheque”.