Landmark Judgement of Supreme Court on Cheque Bounce Case 

Landmark Judgement of Supreme Court on Cheque Bounce Case 

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Landmark Judgement of Supreme Court on Cheque Bounce case
Landmark Judgement of Supreme Court on Cheque Bounce case

Introduction

Post-dated cheques, which provide the drawer of the cheque some knowledge, are a frequently utilized type of payment in today’s world in the form of checks. It is important to take care that the same drawer does not abuse the setup that has been given to him. It is at this point that legislation becomes necessary.

Transaction processors are now more straightforward and easier to understand than they were before the Negotiable Instruments Act of 1881. The Act was created to protect the use of many payment methods, including the use of checks, bills of exchange, and promissory notes. It emphasizes each of these methods separately to show how each should be used, as specified in Section 13(1) of the aforementioned Act.

Basics of Cheque Bounce 

A check is said to have “bounced” when it is submitted to the bank for payment after being received from the drawer and is turned down and returned unpaid. The person who signs the check to authorize payment of the specified sum to the payee is known as the drawer. The individual who receives the check and gives it to the bank to be cashed in the amount stated on it is known as the payee.

The check may bounce for several reasons, including an incorrect date, an inconsistency in the words and numbers indicating the payment amount, an inconsistency in the signature, or a damaged check. However, because these are very minor causes of cheque bounces, the drawer may issue a new check to correct the error and pay the payee the correct amount.

What to do if your cheque is bounced?

In circumstances when checks are not honored, the Negotiable Instruments Act of 1881 is applicable. Since 1881, several amendments have been made to this Act.

The dishonor of a check is a criminal offence under Section 138 of the Act, which carries a maximum two-year jail sentence, a monetary fine, or both.

Within 30 days of receiving the bank’s “Cheque Return Memo,” the payee must give the drawer the notice. The notification must state that the payee must receive the amount of the check within 15 days of the drawer’s receipt of the notice. The payee has the right to submit a criminal complaint under Section 138 of the Negotiable Instruments Act if the cheque issuer does not make a new payment within 30 days of receiving the notification.

Landmark Judgements

Canara Bank vs Canara Sales Corporation & Ors.

The issue of checks with fraudulent signatures being presented for cashing was investigated by the Supreme Court.

It was decided that a bank is not legally obligated to provide any kind of payment in response to a check that is presented for encashment but bears forgeries. It would be assumed that the bank broke the law by debiting the client for the amount of the check if it made any payments in favor of such checks. 

Dalmia Cement Ltd. V. Galaxy Traders & Agencies Ltd.

Criminal Appeal No.957 of 2000

The purpose of section 138 of the Negotiable Instruments Act was mentioned in this case by the Hon’ble Supreme Court of India. The court noted that section 138 was added to the statute when it was passed with the specific purpose of creating a particular provision involving strict responsibility as it related to checks as negotiable instruments.

Conclusion 

A key tool for the regulation of the Act is Section 138 of the Act, which establishes severe responsibility in the event of a payment default. Numerous actions are being done to implement changes made possible by the Negotiable Instruments Act of 1881. Even though all of the adjustments being proposed by the legislature are aimed at making things better, it’s important to remember the reality of this improvement. 

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