-by Barrister Shajib Mahmood Alam
The Negotiable Instruments Act 1881 regulate this area of the law. Section 6 of the said act defines a cheque.
The different parties to a cheque are as follows:
- Drawer – This is the writer of the cheque
- Drawee – This is the bank
- Payee – This is the intended recipient of the cheque
Different kinds of cheques:
- Cash or bearer cheque – This kind of cheque has the instruction to the bank to provide cash to whoever presents this cheque or if a name is mentioned then cash will be provided instantly to that person.
- Account Payee Cheque – This cheque is issued to be deposited into the account of the recipient. The cheque is then placed for clearing and after bank to bank negotiation, account is either credited or cheque is returned as appropriate.
- Blank Cheque – A signed cheque with no mention of amount or date or both.
Contents of a cheque:
- Account Number
- Date of issue
- Cheque Number
- Recipient Name
- Amount money in numerical and word format
- Intended way of deposit i.e cash/bearer or A/C Payee
Common Reasons for Dishonor:
- Insufficient Fund
- Signature absent or mismatch
- Amount mismatch
- Cheque stopped by drawer
- Damaged Cheque
- No seal (when applicable)
What to do when a cheque is returned/dishonored?
Upon being officially informed by the bank (usually known as a dishonor slip), the payee must issue a notice (usually a legal notice) to the drawer with 30 days of so being informed demanding payment against the said cheque.
After giving the notice, the payee must wait 30 days giving drawer to resolve the issue. In case of failure, on expiry of thirty days, the payee then has 30 additional days within which he must initiate a law suit against the drawer. These law suits are filed under jurisdictions of metropolitan magistrates, magistrates of first class or chief judicial magistrates (as applicable).