Risk of cheque bouncing
Hi I issued a cheque to a vendor for 2.6 L as security (Dated 15 Apr) and then transferred the amount on 3 instalments after the cheque date and the vendor did not deposit the cheque. However, I owe him another 2.2L the payment of which is due and I need another week to repay. Can he deposit the old cheque of higher amount than the liability and proceed legally against me if it bounces. If he does move legally, what is the process he will need to follow and how much time do I have to repay him to avoid arrest.
Step I: Immediately issue legal notice justifying your action to stop payment.
Step 2: Lodge a representation with your bank to stop payment on the disputed cheque.
The cheque in question was issued as security for the 2.6 L loan, which has been cleared by you. Hence, the vendor cannot encash the cheque as the contract for which the cheque was acting as collateral has been successfully completed. You can simply cancel the cheque with your bank to ensure that the vendor cannot misuse the same. You may send a ‘Stop Payment’ letter to the bank, addressed to the Bank Manager. In this letter, you can request the bank to stop encashment of the cheque issued to the vendor, for which you should provide the bank with:
The purpose of issuing a security is to ensure that the lender’s interest is protected in case of failure to repay the debt on the part of the lendee or the borrower. Since you have already repaid your debt (2.6L) you shall not be held liable for dishonourment of the cheque. The 2.2L amount is a separate contract and is not protected by the cheque issued for 2.6L loan and hence the vendor cannot encash the same for the distinct 2.2L loan.
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