Bounced cheques
V. GOPALAN
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Supreme Court decision will open a Pandora's box
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THE RECENT judgment of the Supreme Court in a cheque bounced case has far-reaching implications which appear to have missed the attention of all concerned, particularly professional bodies such as the Institute of Chartered Accountants of India and the Institute of Company Secretaries of India and various chambers of commerce.
In a cheque bounced case filed by the payee against the drawer of the cheque, the drawer has contested the genuineness of his signature and has asked for its verification by a handwriting expert.
The Supreme Court has upheld the contention of the accused and allowed his signature on the instrument (the cheque) to be verified by a handwriting expert to ensure its genuineness. The judgment is a reversal of the order of the High Court which dismissed the drawer's plea for signature verification.
Unfortunately, the Supreme Court decision will open a Pandora's box and every drawer of a bounced cheque may call for the verification of his or her signature on the instrument by a handwriting expert further delaying the legal process.
Unwritten contract
The honouring or otherwise of a cheque by the bank on which it is drawn follows from the unwritten contract between the drawer (the customer of the bank) and the bank. The bank is supposed to carry out the mandate of the customer by honouring the cheque subject to certain conditions as regards the availability of funds in the customer's account and that the cheque has been drawn in order and the signature of the drawer tallies with the specimen of the drawer's signature in the bank's records.
In other words, it is for the bank to decide on the genuineness or otherwise of the customer's signature. Again, it is for the customer to take up with the bank if it has honoured a cheque with a forged signature of the customer. Whereas the payee has received the cheque from the customer in good faith in fulfilment of a valuable consideration already satisfied and deposited the cheque in the collecting bank and the paying bank honours the cheque, this is to be termed as `payment in due course.'
Where the paying banker returns the cheque for reason of `insufficient funds,' the payee is protected by the provision in the Negotiable Instruments Act. At that point of time, the drawer cannot take the stand that the drawer's signature is forged. It is also not understandable how any person should forge the customer's signature for meeting a payment liability of the customer himself.
The points that are to be noted here are the customer's responsibility to keep the cheques safely and ensure that no other person has access to the chequebook. In the event of any cheque leaves being lost, the customer should inform the bank immediately, so as to stop payment on such missing cheques.
The customer's lapse or failure on this ground cannot exonerate him from his liability to his creditors in satisfying their claims.
Hence the Supreme Court's decision needs reconsideration. The professional bodies should take up this matter in right earnest with the Supreme Court to avoid legal delays.
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