Cheque Returns, a Bounced Supplier Payment and a Mistyped NEFT
Sameer runs a small tailoring unit in Nagpur. On 3 March he deposits a cheque for ₹85,000 dated 20 February, drawn on a Nashik bank by a customer, into his current account. On the same day he issues a cheque for ₹60,000 to his cloth supplier, expecting the ₹85,000 to be credited within two days. The customer's cheque is returned on 6 March with the remark 'signature mismatch'. Sameer's own cheque is presented on 7 March and is returned for insufficient funds. Separately, on 5 March, Sameer's accountant transferred ₹20,000 through NEFT to a supplier but typed one wrong digit in the account number; the money was credited to a stranger's account. Sameer's bank says it cannot reverse the NEFT because the beneficiary's account was valid. The supplier says no payment has arrived and threatens legal action. Sameer has ₹18,000 in his account and no overdraft limit.
1. Explain what happened to the customer's cheque and Sameer's legal position as holder of that cheque.
Read the worked answer
The customer's cheque was valid when presented. It was dated 20 February and deposited on 3 March, within the three-month validity period. Return for 'signature mismatch' is a technical return, not a dishonour for insufficient funds. So Section 138 of the Negotiable Instruments Act is not attracted on this return.
Sameer's options:
- Ask the customer for a replacement cheque with the correct signature and re-present it within validity.
- Send a written demand for ₹85,000 with the return memo; if it remains unpaid, file a civil suit for recovery.
- If a corrected cheque is re-presented and returned for insufficient funds, the Section 138 notice route becomes available.
He should preserve the return memo and deposit slip. He also should not have issued his own cheque before the customer's cheque was cleared; expected credit is not a defence to his own dishonour.
2. Sameer's own ₹60,000 cheque has been returned. Is he criminally liable, and what should he do immediately?
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Yes, Sameer is exposed under Section 138 if the conditions are met. His cheque was for a genuine supplier debt, presented within validity, and returned for insufficient funds. The fact that he expected the customer's cheque to be credited is not a defence.
- The supplier must send a written notice within 30 days of receiving the return memo.
- Sameer then has 15 days from receipt of notice to pay. If he pays within 15 days, no complaint can be filed.
- If he does not pay, the supplier can file a complaint within one month after the 15-day period expires.
Immediate steps: do not stop payment or close the account; arrange funds and pay or settle in writing; ask the supplier for a written acknowledgment; keep proof of payment. He should also ask his bank about return charges and any restriction on the account, and avoid issuing further cheques until the position is regularised.
3. What can Sameer do about the ₹20,000 NEFT sent to the wrong account?
Read the worked answer
NEFT credit is final once the beneficiary's account is credited; Sameer's bank cannot unilaterally debit a stranger's account.
- Step 1: Give his bank a written complaint with the UTR, date, amount, wrong account number and correct beneficiary details. The bank will contact the beneficiary bank.
- Step 2: The beneficiary bank can reverse only with the account holder's consent. If the holder refuses, Sameer must seek restitution through a civil suit; the bank records will identify the holder.
- Step 3: If there is reason to suspect fraud or a mule account, report on the cybercrime portal and to the beneficiary bank's fraud team.
- Step 4: If the bank does not respond within 30 days, escalate to the RBI Integrated Ombudsman.
Practical lesson: verify the account number and IFSC, and use the beneficiary name check where available. A valid account number, even if it belongs to the wrong person, is enough for the system to complete the transfer.