The Post-Dated Cheque that Came Back Twice
On 10 March, Sujit, who runs a hardware shop in Barasat, gives his supplier Ramesh a cheque for ₹48,000 drawn on his current account at a nearby branch. Because he expects a payment from a contractor on 22 March, he writes 25 March in the date field. Ramesh, who needs money urgently, deposits the cheque on 15 March. The branch returns it the next day with a memo reading 'presented before due date'. Ramesh sends it again through clearing on 25 March; by then Sujit's account shows ₹41,500, because the contractor paid only ₹30,000 and Sujit has also paid ₹12,000 as shop rent. The cheque is returned a second time for insufficient funds. Sujit meanwhile claims he had telephoned the branch on 24 March asking them to stop payment, but the request reached the branch only on 27 March. Ramesh is furious and says the bank 'must pay' because the cheque was signed and stamped properly.
1. Was the branch right to return the cheque on 16 March, and can Ramesh hold the bank liable for refusing payment?
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The branch was right, and Ramesh cannot recover from the bank.
- A cheque is payable on demand, but only on or after the date written on it. The cheque carried 25 March, so presenting it on 15 March made it a post-dated cheque. The drawee bank has no authority to debit the drawer's account before that date; paying early would expose the bank to a claim from Sujit if the funds were short on the earlier date, because it would have paid without a valid mandate.
- A payee has no contract with the drawee bank. The bank's mandate comes from its customer, Sujit. If a bank wrongly refuses payment, it is the drawer who may claim against the bank; the payee's remedy is against the drawer on the underlying debt.
- The 16 March return is not a 'dishonour' in law. The cheque had not been validly presented because it was not yet payable, so no cause of action arose from that return.
- The 25 March return is a genuine dishonour, because ₹48,000 was presented against a balance of ₹41,500 - the cheque exceeded the arrangement.
- Validity: a cheque is valid for three months from its date, so the 25 March cheque could be presented up to 25 June; each presentation that is dishonoured gives a fresh cause of action.
Conclusion: the bank followed the mandate; Ramesh's real claim is against Sujit, and the practical route is the statutory notice.
2. Assuming Ramesh receives the return memo for the second dishonour on 27 March, work out the dates for a Section 138 NI Act notice and complaint, and explain what would defeat the case.
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Timeline under Section 138 of the Negotiable Instruments Act, 1881:
- Notice: a written demand notice must be sent to Sujit within 30 days of receiving information of the dishonour - here, by 26 April. It must demand ₹48,000 plus bank charges and give 15 days to pay.
- Drawer's time to pay: 15 days from receipt of the notice. If it is served on 2 April, Sujit has until 17 April.
- Cause of action arises on the 16th day if he does not pay - here 18 April.
- Complaint: to the Magistrate within one month of the cause of action - by about 18 May.
What would defeat or weaken the case:
- Filing before the 15-day period expires, or after the one-month window closes (condonation is discretionary, not a right).
- Failing to prove service of the notice - the RPAD receipt and the correct address must be preserved.
- Not sending the notice to the drawer himself, or sending it to a wrong address.
- Relying on the 16 March return; since the cheque was presented early, that return gives no cause of action at all.
- Sujit paying within 15 days of the notice - the offence is then not made out.
Conclusion: Ramesh's clock starts on 27 March, not 16 March. A notice sent in mid-April and a complaint filed in May are within time; a complaint filed in June is not.
3. What was the bank's duty in respect of Sujit's telephone call of 24 March, and what should Sujit have done differently?
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Stop payment is an instruction, not a conversation.
- It must be given in writing (or through the bank's authenticated channel), signed, and must reach the branch before the cheque is presented and paid. The bank's duty begins when the instruction is received and noted. The branch recorded it on 27 March, after the 25 March clearing, so the bank was bound to deal with the cheque according to the mandate. An unconfirmed phone call does not shift the loss to the bank.
- Even a timely stop order would not have saved him. Where there are insufficient funds, the cheque would have been returned anyway; and a return for 'payment stopped by drawer' is also a dishonour that can attract Section 138. His real problem is the ₹6,500 shortfall, not the late letter.
What Sujit should have done:
- Not issued a cheque for more than the available balance; ask the branch in writing for an overdraft or temporary arrangement instead.
- If he genuinely needed to delay payment, tell Ramesh honestly and renegotiate a date rather than rely on a post-dated cheque.
- If he wanted to stop payment, send a signed written instruction immediately, with an email/telephone confirmation, and obtain an acknowledgement number.
- Keep a liquidity buffer for the clearing days (the ₹12,000 rent should not have been paid just before a ₹48,000 cheque was due).
Costs he now carries: the return charges, the ₹48,000 debt, the Section 138 notice, and the loss of credibility with a supplier.