Cheque Bouncing

A recent Supreme Court judgment in a cheque bouncing case is rather disturbing in that 95 per cent of money and trade transactions in the country are still settled only through cheque transfers.

The judgment relates to an instance where a cheque was returned by the paying bank for the reason that the signature of the drawer does not agree with the specimen in the bank records. 

The Supreme Court has decreed that returning of a cheque on such grounds will be treated on the same footing as a cheque being returned for want of funds in the drawer’s account, and hence attract prosecution under the Negotiable Instruments Act (Amended) unless the drawer regularised the matter within the stipulated time. 

Banks normally do not return cheques if there is a small deviation in signature. They check whether the specimen signature was provided many years ago, and also take into consideration the payee status, that is, whether it is a genuine payment such as towards electricity or telephone or any other routine payment. 

Only when banks suspect forgery do they return the cheques. 

According to news reports, there are thousands of cases pending in various courts in the country in respect of bounced cheques returned for “insufficient funds”. 

The apex court’s judgment now may add to the number of such pending cases. It is therefore desirable that the Supreme Court reviews the verdict. 

A statutory body, such as the Institute of Chartered Accountants of India, may initiate the process of approaching the apex court as it is well qualified to take up the issue. 

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