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in Civil Law Banking Law
Asked May 16, 2017

Cheque bounced at five locations

  • 1 Answer

We had taken amount from private financier for high interest rate by giving cheques as security purpose. Now the financier has bounced our cheques in various location with other person names. Recently we received 5 court notice from various location. Sir, please help me to resolve the court issue.

Answer 1

S. 138 of the Negotiable Instruments Act, 1881[1] provides penalties for the dishonor of cheques. Under this provision, drawer of a cheque may be held liable for dishonor of the same only against the drawee i.e., to whom the payment is intended to be made. In this case, the “other persons” are not the drawees of the dishonored cheques and hence you shall not be held liable.

Complication may arise due to the fact that the cheque was not a duly filled one. However, S. 20 of the Act[2] provides that the instrument may be wholly blank or incomplete in any particular; in either case, the holder has the authority to make or complete the instrument as a negotiable one. In the case of a signed blank cheque, the drawer gives authority to the drawee to fill up the agreed or intended liability. Here, even though the drawee’s name was not filled-in by you, you can successfully prove that the intended drawee(s) was the private financier and not the “other persons” by way of the loan contract (written/oral) as the cheque was drawn as collateral against the loan provided by the financier and not for any other person or purpose.

Therefore, you can send a reply to the court notice with all the significant and real facts and it should also be mentioned that the cheques were for security and not for discharging the liability of the drawee against “other persons”.



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Agree Comment 0 Agrees almost 4 years ago

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