Cheque bouncing
AK Misra
(Querist) 17 October 2016
This query is : Resolved
Banks are keeping few Cheques whle giving Housing Loan/Vehicle Loans etc.
Whether in case of default / account become NPA,Bank can fill entire balance in a cheque and lodge in clearing to make a criminal case under Section 138 upon bouncing of such cheque?
Guest
(Expert) 17 October 2016
You are mistaken. Cheques are always for EMIs, not for arbitrarily filling in the entire balance with the intention to file criminal cases. Rather, the bank can be sued for cheating and breach of trust, if such thing happens.
Ms.Usha Kapoor
(Expert) 18 October 2016
Agree with advocate Mr.Dhingra Ji.
Devajyoti Barman
(Expert) 18 October 2016
Yes, if you default in making EMI they can very well present those case for encashment.
There being a lawful debt to discharge, there is no illegality in keeping few PDCs.
malipeddi jaggarao
(Expert) 18 October 2016
Banks are interested in recovering the dues in time. They are not interested in booking the customer in criminal cases. At the same time, the customer should also be responsible and should not find to escape from repaying the debt in time. Banking is based on trust. If the trust is breached on either side, the other party can take all steps including coercive action. Instead of posting the query in this forum, butter you go to the Bank and settle the matter amicably.
Guest
(Expert) 18 October 2016
Well analysed opinion by Shri Malipedi Jaggarao.
R.K Nanda
(Expert) 18 October 2016
Nothing to add more.
Rajendra K Goyal
(Expert) 18 October 2016
Respected Expert P.S. Dhingra ji,
Banks adopt two ways or mix of both:
Generally Bank prefers EMI in cash or through Banking channel. As safeguard,
Banks take cheques of EMI in advance (date may or may not be filled), for amount of EMI. Or the Banks take 2-3 signed cheque with name of payee filled but date and amount are left blank. In case of default, Bank fills full amount of outstanding in the cheque and get it bounced, and file case for full amount claim, so that the borrower may not set free by paying EMI amount only from the case.
By giving blank cheques, account holder authorize the Bank to fill it.
Rajendra K Goyal
(Expert) 18 October 2016
Author,
Though it is academic query but replied:
You asked:
Whether in case of default / account become NPA,Bank can fill entire balance in a cheque and lodge in clearing to make a criminal case under Section 138 upon bouncing of such cheque?
Answer:
By giving blank check borrower authorise the Bank to fulfill the blanks. It is legal as per NI act.
Hence it is legal.
Guest
(Expert) 18 October 2016
Rajendra ji,
There is no rule for the banking industry to take blank cheques for any loan. If they insist for blank cheques that is illegal on their part. They normally take PDCs in advance with EMI and due dates noted on them. If a bank asks for blank cheques, the borrower can refuse or even make complaint to the higher authorities.
Since the present query is merely an academic query that is made hypothetically assuming as if the banks take blank cheques.
But the experts start replying on academic queries without knowing the real problem.
Rajendra K Goyal
(Expert) 18 October 2016
Respected P.S. Dhingra ji,
I have mentioned the practical aspects which the Banks adopt.
Banks get 2-3 such cheques not equal to no. of EMI.
Under NI Act completing cheque and presenting may not be material alteration.
Guest
(Expert) 18 October 2016
Can't be said practical aspect, rather a blackmailing tactics, if the banks adopt that practice.
The borrowers need to remain cautioned on that aspect, if the banks resort to.
AK Misra
(Querist) 18 October 2016
Mr.Dhingra no one ask hypothetical questions.
In the present case a housing loan is repayable by 285 EMIs.No one gives that number of Cheques.Banks do take few Cheques as per their tendency.
Bank has initiated legal recourse under SARFaeSI/DRT . My simple question is that whether filling one of those cheques for entire outstanding amount which runs in lacs and getting it bounced makes a sustainable case under Section 138. What is the status of that Cheque?Whether it makes a Security to Banker?
I wish to have legal clarity with few citation cases from my learned colleagues. Thanks
AK Misra
(Querist) 18 October 2016
Mr.Dhingra no one ask hypothetical questions.
In the present case a housing loan is repayable by 285 EMIs.No one gives that number of Cheques.Banks do take few Cheques as per their tendency.
Bank has initiated legal recourse under SARFaeSI/DRT . My simple question is that whether filling one of those cheques for entire outstanding amount which runs in lacs and getting it bounced makes a sustainable case under Section 138. What is the status of that Cheque?Whether it makes a Security to Banker?
I wish to have legal clarity with few citation cases from my learned colleagues. Thanks
Rajendra K Goyal
(Expert) 18 October 2016
As I have mentioned, by giving blank cheque drawer of cheque authorize the payee to fill the due / payable / claimed amount in the cheque.
Kumar Doab
(Expert) 18 October 2016
The stance of the bank/banker has been explained by experts.
P. Venu
(Expert) 18 October 2016
The fact of the matter is that provisions Section 138 NI Act has become an instrument of exploitation and oppression and majority of the cases under this provision are an abuse of the process of the Court. Though this is well known it is seldom that the advocate for the defense gathers the sagacity to put forth truth as the defence.
Guest
(Expert) 18 October 2016
Mr. AK Mishra,
Your question was, "Banks are keeping few Cheques while giving Housing Loan/Vehicle Loans etc.," That is a very generic query on both types of loans, without stating the real problem that you face, which cannot be said as a problem.
Usually Banks ask for 12 post dated cheques in advance on year to year basis, not 285 cheques at a time.
Also no bank allows 285 EMIs for vehicle loan.
By the way, which from which bank you took housing loan?
Rajendra K Goyal
(Expert) 19 October 2016
Waiting reply from author on the questions from expert P.S. Dhingra ji.
Rajendra K Goyal
(Expert) 19 October 2016
Repeated at:
http://www.lawyersclubindia.com/experts/Cheque-bouncing-620406.asp
Kumar Doab
(Expert) 19 October 2016
What is the need to repeat?
Rajendra K Goyal
(Expert) 19 October 2016
Respected expert P.S. Dhingra ji,
You have mentioned that "Usually Banks ask for 12 post dated cheques in advance on year to year basis, not 285 cheques at a time."
Practically, after using 12 cheques borrower would not give further cheques easily / bank staff has to approach him time and again to get cheque. Borrower has more than 100 rasons (Bahaney)and in absence of cheques account would turn NPA.
The system of getting cheque is being followed till court decide it illegal.
P. Venu
(Expert) 19 October 2016
Perhaps, the root of the problem is the presumption provided under Section 139; our social conditions do not warrant such a presumption. Some of the MPs had highlighted this inherent deficiency during the discussions during the amendment to the NI Act.
It high time that initiative is taken to get this provision declared unconstitutional.
Guest
(Expert) 19 October 2016
Dear Shri Rajendra,
Bankers are not such type of duffers to ask for PDCs for more than 24 years (285).
In home loans almost all debtors try to give further lot of cheques with the fear to face litigation and auction of his house on default after losing the case. So, practicability depends upon the nature of loan. The bankers have the law in their own favour when a debtor defaults in repayment of secured loans.
However, if you feel that the banks are right in asking for blank cheques, you may better quote the relevant provision of law to help the author. Otherwise, theoretically everything is right, if the author is satisfied. That is not going to change the factual position or to harm me, even if you try to prove me false without any logic or proof.
Rajendra K Goyal
(Expert) 20 October 2016
Respected expert P.S. Dhingra ji,
I have advised on the basis of practice and procedure adopted in general, practice is acceptable / valid till competent court decide otherwise.
Guest
(Expert) 20 October 2016
Dear Shri Rajendra,
I only know that where the question of law arises, assumptions, perceptions and conventions (practices) have no relevance, when even the banking industry cannot prescribe any such unethical practice in black & white.
I don't think the querists come here with the expectation from the experts to tell them about practices instead of legal aspects.
Kumar Doab
(Expert) 20 October 2016
Mr. P. Venu has added value to the discussion with his last post.
The stance of the banks/bankers has been explained to the author, in detail by Expert Mr. Rajendra K Goyal.
The author may approach a very able counsel to defend his interest.
Guest
(Expert) 20 October 2016
Shri Malipeddi Jaggarao, being a well experienced banker has already advised appropriately 2 days back. If liked, the author may recheck his advice also.
Rajendra K Goyal
(Expert) 20 October 2016
Respected expert P.S. Dhingra ji,
The practice can not be illegal till any law / decision of court comes deciding it illegal.
In banking and even in other offices practice has great importance, decisions have accepted practice as legal in banking and most procedure are based on practice not violating law.
Kumar Doab
(Expert) 20 October 2016
Expert Mr. Mallipedi Jaggarao has appropriated: 'If the trust is breached on either side, the other party can take all steps including coercive action.'
The stance of the banks/bankers has been explained to the author, in detail.
The author may approach a very able counsel to defend his interest.
Rajendra K Goyal
(Expert) 20 October 2016
Yes, agree with the advice from expert malipeddi jaggarao.
Guest
(Expert) 20 October 2016
Rajendra ji,
So, in other words, by your statements, "The practice can not be illegal till any law / decision of court comes deciding it illegal. ....... "In banking and even in other offices practice has great importance, decisions have accepted practice as legal in banking and most procedure are based on practice not violating law," you believe that the banks are right and the querist should not challenge the bankers, if they fill entire balance in a cheque and lodge in clearing to make a criminal case under Section 138 upon bouncing of such cheque?
Rajendra K Goyal
(Expert) 20 October 2016
Respected expert P.S. Dhingra ji,
Author may challenge to have court ruling in the matter.
Guest
(Expert) 20 October 2016
OK, if that be.
