Reining in the culture of false 'cheque dishonour' cases

Bangladeshis find issuing cheques to be of greater convenience over digital fund transfers. In an era of fintech and MFS, our comfort still lies in the physical monetary form, be it notes or cheques. 

People still prefer cheques over carrying large amounts of cash because it is safer. A cheque, as per section 6 of the Negotiable Instruments Act 1881 (NI ACT) is a 'bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand.'

Since the introduction of cheques, there has been a rise in the number of money-related crimes owing to our over-dependence on them. That was when The NI Act of 1881 came as a threat to those with wrong intentions. This 140-year-old law has continued to ruin their ill motives and bring them to book. Section 138 of the Act comes with a strict liability offence of dishonouring and non-payment of a cheque.

If a person transfers a signed cheque to someone, he is bound to pay the amount at any cost, otherwise, he will be liable under S.138 of the NI ACT to pay triple the amount sought and face an imprisonment of 1 year for non-payment. The Court observes a very strict mindset in terms of bounced or dishonoured cheques. Moreover, with the introduction of Section 138A by an amendment of the Act in 2006, the law became more powerful ensuring a zero-tolerance policy against cheque dishonour. 

A cheque can be dishonoured in many ways. For example, if the account does not have an equal amount of funds mentioned in the cheque or an insufficiency of funds; if advice is given by the cheque giver to the bank to withhold the fund; if the sign on the cheque does not match or if the validity of the cheque is over. 

This law comes in handy in certain situations. There are active groups rampant around the country who defraud innocent people by handing over cheques in the name of returning back lent money, salary, payments or honorarium. When the victim places the received cheque before banks to encash the money, they are returned for insufficiency of funds in that account. In this case, one can file a case against the culprit under section 138 of the NI Act to seek redress from the court. 

But not every case under section 138 is filed for good reasons. Some of them are used as a medium of harassment and extortion.

This specific provision of the law, section 138 is so strict that it has unfortunately been dubbed 'draconian' at times and is being largely misused due to its vague terminology. One can misuse this law by taking a cheque from another person to harass and defraud them. Such incidents mostly occur in bank cheques exchanged in business transactions. 

For example, in one scenario, someone takes a loan from another person and in return hands them a cheque for security purposes. Here, the other person writes in the cheque an amount more than he lent to that person, and dishonours the cheque immediately. This then allows him to file a case against the innocent cheque-giver who is unaware of the trap he has fallen into.

In another scenario, two individuals entered into a contractual relationship for a specific work. In order to complete that work in a specified time, the first-person hands over a cheque in advance to the second person. The second person could not finish the work in the specified time and naturally, the first person advised the bank to hold the money. Yet, the second person would be able to dishonour that cheque and use it as a weapon of harassment against the first person.

As a lawyer dealing with cases of this sort, my experience tells me that the law is being used to exploit rather than help. 

As another example of how innocent people can fall prey to this law, I'd refer to one of my client's cases. My client who is a businessman needed an urgent loan but did not go to any banks since that process is too lengthy. He was offered the same amount as a loan by a third party under the condition that it will be disbursed in a very short time. 

The man took him to his so-called office and immediately gained his trust. My client was then told to hand him two cheques as security and that the loan will be disbursed to him in ten days. The man did not hand him the loan and instead dishonoured the cheque and filed a case against my client under section 138 of the NI Act. 

My client was arrested and, in a year, he was convicted. Now he has to submit 50% of the amount to appeal to a higher court. My client later found out that this man had filed more than fifty cases or more against many others, sometimes promising them loans or jobs before tricking them into giving him cheques.

The vagueness and rigidity of this law have made it prone to be misused. Innocent people in business transactions are often victimised even when they do not have any wrong intentions. Due to this strict liability and lack of requirements, there is a floodgate of false NI Act cases waiting to be disposed of at the courts. This is high time this law gets amended to prevent further misuse.

Barrister Aiman R Khan is an Associate Advocate at Rahman Law Associates & Company. Email: [email protected]

Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions and views of The Business Standard.