Question

Do some quick internet research and find a case that deals with one of these situations. Provide a brief summary of the facts of the case, and provide the court's analysis. Be sure to provide a reference.

potential issues with checks, including postdated checks, stale checks, stop-payment orders, death or incompetence of a customer, and checks with forged drawers' signatures.

Answer 1

Potential issues with cheques are:

a) Unnecessary time and effort. When a client hands you a cheque it is only the beginning of a long and demanding paper-chain

b) The risk of cheques bouncing

c) Cheque fraud.

The major issues in post dated cheques before the courts are:

a) Post-dated cheques that are stopped by the bank or issuer, causing problems for whoever is to be paid by the cheque for goods or services provided and

b) the reverse, in which a person is promised goods or services but does not receive them and has to stop the cheque

The latest supreme court judgement on Section 138 under the Negotiable Instruments Act, 1881 passed by the Delhi High Court in January 2018, had drawn a distinction between traditional criminal cases and offences under Section 138 of Negotiable Instrument Act, 1881.

As per Section 138 under the Negotiable Instruments Act, 1881, Supreme Court's cheque bounce case judgement, by the bill of exchange, means that the document will stay negotiable and will turn into cheque only on the date it will be payable on demand.

Stale cheques:

Stale check is a check that is presented to be cashed or deposited at a bank six months or more after the date it was written.

SECTION 84 SUB-SECTIONS (1) AND (2) OF NEGOTIABLE INSTRUMENTS ACT, 1881 PROVIDE AS FOLLOWS:

(I) Where a cheque is not presented for payment within a reasonable time of its issue, and the drawer or person on whose account it is drawn had the right, at the time when presentment ought to have been made, as between himself and the banker, to have the cheque paid and suffers actual damage through the delay, he is discharged to the extent of such damage, that is to say, to the extent to which such drawer or person is a creditor of the banker to a larger amount than he would have been if such cheque had been paid.

Sub-section (2), Section 84: "In determining what a reasonable time is, regard shall be had to the nature of the instrument, the usage of trade and of bankers, and the facts of the particular ease."

In the reported case of NLR 1993 CLI 752 in the matter of Habib Bank Ltd vs. Jamilur Rehman, reliance is held by Justice Syed Haider Ali Pirzada, that "Cheque/draft not presented within six months of its issue would become out of date or stale. Suit based on out of date or stale cheque and draft cannot be decreed." and "defendant's revision against decree passed in a suit based on cheque which had become stale, the High Court accepting revision, setting aside decree and dismissing suit."

stop-payment order:

The Supreme Court has ruled that the stop payment of post-dated cheques issued by a person to settle his debt or liability could amount to a penal offence. Submitting post-dated cheques by borrowers is a customary practice for home finance and other retail products like personal, auto and consumer durable loans.

Re:Susmit Kumar Nandi vs Bank Manager(SBI) in District Consumer Disputes Redressal Commission 2019

issues regarding death or incompetence of a costumer:

(a) A payor or collecting bank's authority to accept, pay, or collect an item or to account for proceeds of its collection, if otherwise effective, is not rendered ineffective by incompetence of a customer of either bank existing at the time the item is issued or its collection is undertaken if the bank does not know of an adjudication of incompetence. Neither death nor incompetence of a customer revokes the authority to accept, pay, collect, or account until the bank knows of the fact of death or of an adjudication of incompetence and has reasonable opportunity to act on it.

(b) Even with knowledge, a bank may for 10 days after the date of death pay or certify checks drawn on or before that date unless ordered to stop payment by a person claiming an interest in the account.

checks with forged drawers' signatures.

The term "forged check" is often used to describe a check on which the drawer's signature is forged or unauthorized. Such a check is meaningless as far as the drawer whose signature is forged is concerned. The drawee bank that pays a forged check is generally held responsible for the resulting loss.