DVC Cheque in Bangladesh – Legal Aspects

DVC Cheque in Bangladesh – Legal Aspects

In Bangladesh, the term “DVC Cheque” is commonly used in commercial transactions, particularly in business dealings involving supply chains, garment factories, and buying houses. While not defined in any statute, a “DVC Cheque” generally refers to a post-dated or deferred cheque issued to a supplier or service provider with the understanding that it will be encashed upon fulfillment of certain conditions or delivery milestones.

What is a DVC Cheque?

• DVC often stands for “Delivery Verification Certificate”.
• It is a post-dated cheque issued to a party, usually a supplier, against goods delivered or services rendered.
• The cheque is held or encashed after the buyer confirms satisfactory delivery, verified by documents like delivery challans or inspection reports.
• Common in RMG (Ready-Made Garments) and manufacturing sectors, especially where there is a delay between delivery and payment.

Legal Status of a DVC Cheque

A DVC cheque is legally a cheque under Section 6 of the Negotiable Instruments Act, 1881, and if dishonored, legal action may be initiated under:

• Section 138 of the Negotiable Instruments Act, 1881 (criminal liability for cheque dishonor)
• Section 420 of the Penal Code, 1860 (cheating, in appropriate cases)
• Civil suits for recovery of money

The deferred or conditional nature does not invalidate the cheque but may affect the timing of legal notice and the cause of action.

Legal Requirements under Section 138

To initiate criminal proceedings for dishonor of a DVC cheque, the following conditions must be fulfilled:

1. Cheque must be presented within 6 months from the date on the cheque or its validity period, whichever is earlier.
2. The cheque must be dishonored by the bank due to insufficient funds or exceeding arrangement.
3. A written legal notice must be issued to the drawer within 30 days of dishonor.
4. The drawer must fail to make payment within 30 days of receiving the notice.
5. The complaint must be filed within 1 month from the date of cause of action (i.e., expiry of the 30-day payment window).

Common Issues in DVC Cheque Disputes

1. Conditional Nature of Cheque

If a cheque was issued against future delivery or subject to verification, the drawer may claim the cheque was not meant to be presented yet. However, unless clearly stated on the cheque or in writing, such defense often fails in court.

2. Absence of Supporting Documents

The complainant must show:

• Proof of delivery (invoices, delivery challans)
• Contract or agreement (if available)
• Bank dishonor memo
• Copy of legal notice served

3. Delay in Legal Action

Strict timelines must be adhered to. Delay in sending notice or filing complaint can lead to dismissal.

Civil Remedies

Apart from criminal action, the payee can also:

• File a money suit for recovery of dues
• Seek injunction or attachment before judgment under the Code of Civil Procedure, 1908

Defenses by Drawer

A person accused in a DVC cheque case may raise the following defenses:

• Cheque was given as security, not for encashment
• No delivery or defective delivery of goods/services
• Forgery or alteration of cheque
• Dispute on amount or performance

Note: Mere denial is not sufficient; the burden shifts to the accused to rebut the presumption under Section 118(a) and Section 139 of the NI Act that the cheque was issued for lawful consideration.