Dishonor of cheques is a significant legal issue in Bangladesh. It results in financial conflicts and troubled business relationships. Under the Negotiable Instruments Act, when a cheque is returned unpaid due to insufficient liquidity or other factors, it could lead to criminal liability. That’s why a proper understanding of legal remedies is essential to protect rights and seek redress.
So, Legal Advice BD is here to tell you everything about cheque dishonor cases and legal remedies in Bangladesh!
What is a Cheque Dishonor Case?
When a cheque is returned by the bank for having insufficient funds or cannot be honored, it amounts to dishonor of the cheque or a cheque bounce. However, in theoretical legal terms, a cheque is considered to be dishonored when an individual writes a cheque on their bank account to pay someone else yet the bank returns it unpaid.
This situation occurs mainly for two reasons; insufficient funds or cheques exceeding the agreed amount that the bank can pay. If a cheque is dishonored for the stated reasons, it is deemed as an offense under the law. That’s why it is important to comprehend these conditions. Otherwise, the issuer of the cheque may have to face legal consequences.
A cheque can be dishonored for several reasons. Here are a few reasons simplified:
- Difference of Amount in Word and Figure
- A Cheque Without a Date or Post-dated Cheque
- Unauthorized or Forged Signature
- Forged Endorsement
- Absence of Corporate Seal
- Cheque Not Being Activated or Not Receiving Intimation
- Missing or Difference in Drawer’s Signature
- Payment Stopped By Drawer
- An Account that is Closed, Blocked, or Dormant
- Stale Cheque
Legal Remedies for Cheque Dishonor in Bangladesh
Issues related to dishonored cheques or cheque bounces are dealt with according to The Negotiable Instruments (N.I) Act 1881. This act is in order in Bangladesh. It is considered to be a special law. Its provision always prevails over any ordinary law.
What Actions Can Be Taken For Cheque Dishonor?
In the case of a dishonored cheque, the drawee has the right to file a case against the drawer. The plaintiff has to decide where to file a lawsuit regarding the dishonor of the cheque. The case must be filled at the Cognizance Magistrate Court. Furthermore, the branch of the bank in which the disputed cheque was bounced has to fall within the jurisdiction of the respective court.
For effective guidance through this process, consider our litigation services.
What Steps Can Be Taken to File A Case Under Act 138?
Certain conditions must be met to file a case for dishonored cheques under sections 138 and 140 of the Negotiable Instruments (N.I) Act 1881. The steps are discussed below:
Step 1: Presenting the Cheque
The cheque needs to be presented to the bank within the issuance of 6 months or the validity period. In addition, it can be shown to the bank as many times as the payee is instructed by the drawer to present it.
Step 2: Sending a Notice to the Drawer
The drawer of the cheque has to be sent a notice in writing. It should include a demand for payment within 30 days from the date when the cheque was dishonored or returned.
Step 3: Payment Period for the Drawer
A timeframe of 30 days from the date of the notice will be given to the drawer to make the payment.
Step 4: Filing a Legal Complaint
If the drawer fails to pay the due amount within the stipulated time, the drawee has to file a case within 30 days of the expiry of the 30 days given to the drawer of payment.
How To Claim Against Companies for Dishonored Cheques
If the offense under Section 138 is committed by a company, the company along with every person in charge or responsible to the company, will be liable for the offense under Section 140 of the Negotiable Instruments (N.I) Act 1881.
Again, under Section 140, any person will not be liable if they can prove that they had no knowledge of the offense being committed or they took the necessary steps to prevent the commission of the offense.
For a claim against a company, offering a notice of dishonor on the firm will be enough. In this case, it is not necessary to serve notice on all the partners involved in the commission of the offense. It is advisable to consult a company lawyer to navigate these legal complexities effectively.
What is the Punishment for Dishonored Cheque?
The punishment for a dishonored cheque under the Negotiable Act 1881 is imprisonment for a tenure that may extend to one year or a fine that can extend to thrice the amount of the cheque or with both. Under section 138(1), no appeal against an order of sentence will lie unless the drawer deposits 50% or more of the dishonored amount. It must happen before filing the appeal in the court awarding the sentence.
Legal Remedies for Cheque Dishonor in Bangladesh
Both, cheque dishonor cases and legal remedies in Bangladesh, are rampant. Know about them!
- Filing a Case under the Negotiable Instruments Act: For a cheque dishonor, the payee can file a case in court against the drawer. It generally involves a penalty and the chances of imprisonment.
- Civil Suit for Recovery: Other than criminal proceedings, the payee can file a civil suit to recover the due amount along with any related damages.
- Sending a Demand Notice: A formal notice requesting payment must be sent to the drawer before taking any legal action. The inability to pay within the designated period can strengthen the case.
- Mediation or Negotiation: Parties may go for mediation or negotiation to solve the issue before opting for legal action.
- Banking Regulatory: The dishonor can be reported to the bank by the aggrieved party.
Conclusion
Cheque dishonor cases in Bangladesh create substantial challenges for both businesses and individuals. To avert this problem, legal remedies like filing complaints under the Negotiable Instruments Act offer channels for redress. The involved parties need to understand their responsibilities and rights to lessen their financial losses. Appropriate legal action must be taken at the right time.
Hopefully, this guide on cheque dishonor cases and legal remedies in Bangladesh by Legal Advice BD will be of use to you!