Dishonour of Trust
India Legal|February 1, 2021
The National Legal Services Authority has submitted a report on pre-litigation mediation for cheque bouncing cases. This is a very positive development for the expeditious disposal of such cases
Sujit Bhar
Dishonour of Trust
BOUNCED” or dishonoured cheques are ana thema to a business transaction. This historically repetitive occ urrence has been met with scorn within the commerce ecosphere, and among ordinary folk, somewhat rightly so. Cheques that bounce for insufficiency of funds hit the trust that exists within a business transaction. Trust is the lubricant to any movement and friction is the last thing required here.

A cheque is a negotiable instrument, governed by The Negotiable Instru ments Act, 1881. It is a financial instrument whose importance is underscored by Section 138 of the Act, making boun cing of a cheque a criminal offence. There are some checks and balances, such as if the payee decides to take legal action then he should give the drawer (issuer) a chance of repaying the due amount immediately, through a notice in writing. Penalty is imprisonment up to two years or monetary penalty or both.

The bank’s process is elaborate. When a cheque is dishonoured, the drawee bank is supposed to issue a “Cheque Return Memo” to the banker of the payee, mentioning the reason for non-payment. The payee’s banker then gives the dishonoured cheque and the memo to the payee. The payee can resubmit the cheque within three months of the date on it, if he thinks it will be honoured, and legal action can be taken thereafter.

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