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Cheque dishonour law in Bangladesh.
Barrister Tahmidur Rahman
Since it is practically impossible for a business to function today without the assistance of a bank, Bangladesh has seen a growth in the use of checks during the past ten years. Due to the enormous volume of transactions made using this method, the likelihood of a check being bounced is extremely high. As a result, the recipient of a check must have enough and effective legal options that they can consider if they ever find themselves in this circumstance.
What exactly is cheque dishonour?
When a check is given to an authorized bank within six months of the date it was issued and the amount on the check is not paid by the bank due to any default on the part of the drawer, the check is considered to be dishonoured. That means when the bank rejects the drawee or the person who is a holder in due process, or is dishonoured by the bank, by failing to pay the specified amount as instructed by the drawer (through check) due to the drawer’s error.
Reasons for cheque dishonour
A check is typically not honoured when:
The available funds in the account are insufficient to cover the check.
when a request is made to halt payment.
if the sign does not match with the drawer's sign.
when the amount on the check does not match the written amount (by words).
when the check is improperly filled out.
when it is obvious that the check was incorrectly edited and the incorrect modification was not validated by a second signature.
A check may be dishonoured in the above-mentioned circumstance, but the cheque’s drawer is only accountable if he is at fault for the incident or if he did it intentionally.
In the case of a cheque, the cheque must be submitted to the bank within six months of the day it was issued. If the bank then refuses to honour the cheque, the cheque dishonor case will then begin. If a bank returns a cheque as dishonored, get a written explanation from them. The explanation for the dishonour and other information will be listed on a written document or a check dishonour slip that they will provide.
Section 138 of the Negotiable Instruments Act of 1881 contains the law regarding cheque dishonour. This is criminal law in action. An accused can face up to a year in prison or a fine of three times the amount of the cheque. When the accused party is a corporation, the procedure is the same as in section 138, which is mentioned in section 140 of the Negotiable Instruments Act, 1881, and the responsible person would be liable.
Despite the fact that this is a criminal case, it must begin with a complaint initiated by the magistrate court. Before filing a lawsuit, the complainant must go through some steps.
Cheque bounce punishment
If proven guilty of cheque dishonour, an accused may be sentenced to imprisonment for a term of up to one year, a fine of up to three times the amount of the cheque, or both. The court may impose both imprisonment and a fine (as is customary), but if the court wishes to punish the offender solely by imprisonment, he may do so. The court may impose a fine of up to three times the amount of the check. It is entirely up to the court’s discretion.
Step-by-Step Procedure for Filing a Case in Bangladesh for Cheque Dishonour or Bounce
1. Provide notice
A legal notice must be sent to the drawer via registered mail with an AD as the first step in starting a case under Section 138 of the Negotiable Instrument Act, 1881. The notification must be sent out within 30 days of the cheque being dishonoured, advising the drawer that his cheque has been returned unpaid by his bank and that he must make the entire payment within 30 days of the notice or legal action would be taken.
If the drawer does not provide the money within 30 days of receiving the notice, does not reply, or replied to legal notice but did not provide any satisfactory answer to where the notice was provided, the payee or the holder in due course of the cheque may file a complaint case after a period of thirty days.
2. Time period
- Rejected cheque
- Within 30 days, issue legal notice.
- following notification: 1. Accept the money or continue negotiating if the response is satisfactory or if it is agreed to pay within 30 days of getting the letter. 2. If the response is not satisfactory or if the drawer did not respond to the response, file a complaint case within 30 days after the drawer’s legal time to respond has expired.
Documents required to issue a notice and start a case:
To issue a notice and initiate a cause under section 138 or 140 of the Negotiable Instrument Act of 1881, the following documents and information would be required.
- The cheque
- The cheque’s issue date and the cheque’s rejection date
- Bank-provided document for a dishonored check
- a copy of the notice and its response (if provided)
- Receipt of notice acknowledgement
- Why the cheque was given or the reason for the transaction
- The cheque’s details
- Information about the complainant
How to File a Lawsuit
A case under section 138 or 140 may be brought before the judicial magistrate or metropolitan magistrate with subject-matter jurisdiction. The magistrate must transmit the case to the session court for trial after taking cognizance of it. The session court will then hear the case and make a decision based on the documentation and evidence.
If a check is dishonored, as provided by section 138 of the Negotiable Instrument Act of 1881, the accused may be sentenced to up to one year in prison, a fine that may reach three times the amount of the check, or both.
However, it is a common myth that if the dishonesty of the check is proven, the accused will be fined three times the amount of the check; however, this is not always the case. In addition, the complaint will only receive the amount of the check, not the entire fine. The remainder of the money must be deposited into the government’s account.
How to Avoid Having a Cheque Case Filed Against You
Cheques must be used with caution, and they should not be treated as any other type of document. Here are some things to consider if you frequently use a cheque for a transaction or have a cheque book.
- Keep your cheque book in a safe and secure location.
- After each use, count the remaining pages/leaves.
- If your cheque book or a page of your cheque book is missing, file a GD immediately and notify your bank of the problem.
- Do not provide a cheque as security for any future promise; in our society, we frequently take money/loans and as security provide a cheque with a future date. This is illegal; a cheque should only be used when your account has enough money to cover the payment.
- During the process of writing or drawing a cheque, check if the date, the amount, and the information is correct
- The amount is correctly written in both numeric and word form, and you have used “/=” and “only” as appropriate.
- Extras should not be allowed.
- When possible, avoid using a bearer cheque in favor of a cross-account cheque.
- The cheque shall be used as a consideration, rather than money. If there is no contract or no consideration, do not provide a cheque.
- Finally, if you believe you have made a mistake or that something wrong is about to occur, contact a lawyer right away.
Appeal under Section 138 of the Negotiable Instruments Act
Anyone who is dissatisfied with the lower court’s decision may file an appeal with the higher court under Section 138 of the Negotiable Instruments Act by following the procedure.
- Before the appeal, 50% of the fine (awarded by the lower court) must be submitted.
- An appeal against a session judge’s decision must be filed within 60 days with the High Court Division of the Bangladesh Supreme Court.
- An appeal against the decision of an additional session judge must be filed within 60 days with the High Court Division of the Bangladesh Supreme Court.
- An appeal against a joint session judge’s decision must be filed within 30 days with the High Court Division of the Bangladesh Supreme Court.
Case processing time
Before any case or suit, a common question is, “How much will it take to get a judgment after filing a case?” That depends on a variety of factors, but in general, it can take 1-2 years in Dhaka. In other districts, it takes about a year to receive the lower court’s decision.
Cheque dishonour case under other law
In many cases, you may fail to use this special act of Negotiable Instruments, such as when a person fails to serve a legal notice within one month, or when a person is the victim of a fraudulent document, and so on. In such a case, the sufferer will be unable to obtain an immediate remedy, but this will not be the end of justice. A victim can file a case under general criminal law, such as fraud, or he can file a civil suit to recover money, etc.
Sections 138 and 140 of the Negotiable Instrument Act, 1881 are special laws created for the Act. This act is most commonly used for cheque fraud. This act made it very simple to file a cheque dishonour case by following the procedure, so we should use it to maintain trust in the negotiable instrument and prevent its misuse.
In Bangladesh, what is the penalty for cheque dishonor?
The offence is punishable under the Negotiable Act 1881 by imprisonment for a term up to one year, a fine up to three times the amount of the cheque, or both.
In Bangladesh, how long is a cheque valid?
A cheque is valid for six months from the date of issuance. If the cheque is not honored, you will receive a bank memo stating the reason for the cheque's return.
Is it a crime in Bangladesh to bounce a check?
Section 138 of the Negotiable Instruments Act of 1881 contains the law regarding cheque dishonour. This is criminal law in action. An accused can face up to a year in prison or a fine of three times the amount of the check.
What are the procedures for filing a case for Cheque Dishonour?
Once the cheque has been returned by the bank, before filing a legal complaint against the drawer, you must first send a demand letter/legal notice to such drawer within 30 days of the date the cheque was returned to you by the bank, with the assistance of a cheque bounce lawyer.
What is the time limit in the event of a cheque bounce?
What is the maximum amount for a cheque bounce case? Legal notice must be sent within 30 days of the date the cheque bounces, according to the Negotiable Instruments Act. Following that, the case must be filed within 15+30=45 days of receiving the legal notice.
Can I file a case for a cheque bounce after 30 days?
If you have not filed a complaint case within 30 days of the notice period expiring, you may file a summary suit for money recovery and initiate criminal proceedings under Section 420 I.P.C. within three years of the date of the cheque's issuance.
In which section may the company file a case of cheque dishonor?
To begin, Section 138 of the NI Act makes it clear that whenever a cheque is bounced, an illegal offence is created, which carries a criminal penalty of one year in prison or a fine of three times the amount of the dishonoured cheque, or both.
What exactly is a Dishonoured Cheque?
Dishonoured cheques are those on which a bank refuses to pay ("honour").
How do I record a cash book cheque that has been dishonoured?
Cheque dishonour is recorded on the payment or credit side of the bank column of the cash book. When a cheque is returned, the Bank A/c is credited, and thus the bank column of the cash book is credited.
How do you get out of a cheque bounce case?
File a counter case: If someone files a false cheque bounce case against you in court, you can respond by hiring a lawyer for a cheque bounce case near you. You can also file a counter-cheque against the individual who filed a false cheque bounce case against you.