Dishonor of Cheque

Dishonor of Cheque

1) Preface

A dishonored cheque is such cheque which presented to bank to receive a certain amount but it is refused by the bank to pay due to insufficient funds because the banker can honor the cheque or refuse to pay it on any valid ground. . Dishonestly issuing a cheque is a criminal in Pakistan.The negotiable instrument act 1881 is providing the circumstance when banker is answerable for dishonoring the cheque and when banker is bound to dishonor the cheque.

2) Defination of banker

A banker is a person who is employed by the bank in order manages the business of the bank and receives deposits, issues money on demand to customers and perform other transactions.

3) Defination of check

An order to a bank to pay a stated sum from the drawer's account, written on a specially printed form

4) Kinds of a cheque

Following are the kinds of a cheque.

  1. Cross cheque
  2. Open cheque
  3. Order cheque
  4. Bearer cheque
  5. Traveller cheque

5) Case when banker a right to dishonor a cheque

Following are the cases where a banker has a right to dishonor the cheque.

1.Bankruptcy of customer

If the banker receives any notice regarding the bankruptcy of the customer, in this case a banker has a right to dishonor a cheque.

2.Credit received by customer

If the banker finds that a customer has taken credit from other branch of the bank, in this case a banker has a right to dishonor the cheque.

3.Lien on customer

If the banker has a lien on customer, in this case a banker has a right to dishonor the cheque.

4.Fake signature of drawer

If banker finds that the signature of the drawer is fake or is doubtful about the signature, in this case a banker has a right to dishonor a cheque.

5.Dissimilarity in figures and words

If banker finds any dissimilarity in the figures and words of the cheque, in this case a banker has a right to dishonor a cheque.

6.Miswriting cheque

If banker finds cutting or miswriting in the figures or words of the cheque, in this case a banker has a right to dishonor a cheque.

7.Pre-dated cheque

If the cheque presented is pre-dated, in this case a banker has a right to dishonor a cheque.

8.Postdated cheque

If the cheque presented is postdated, in this case a banker has a right to dishonor a cheque.

9.After banking hours

If the cheque is presented in the bank for payment after the banking hours in this case a banker has a right to dishonor a cheque.

10.After a six months

If the cheque is presented in the bank for payment after six month from its origination, in this case a banker has a right to dishonor a cheque.

11.Insufficient balance

If banker finds insufficient balance in the account of drawer, in this case a banker has a right to dishonor a cheque.

6) Case when bank is bound to dishonor a cheque

Following are the cases when bank is bound to dishonor a cheque.

1.Bankruptcy of customer

If the bank receives any notice regarding the bankruptcy of the customer, in this case the bank is bound to dishonor a cheque

2.Death of customer

If the customer is died and bank has received a notice about the death of the customer, in this case the bank is bound to dishonor a cheque

3.Lunacy of the customer

If the customer is become lunatic and bank has received a notice about the lunacy of the customer, in this case the bank is bound to dishonor a cheque

4.Unstamped cheque

If the cheque presented for payment has not been stamped if legally required to be stamped, in this case the bank is bound to dishonor a cheque

5.Misplacement of cheque

If the cheque is misplaced and customer has intimated the bank for the misplacement of the cheque, in this case the bank is bound to dishonor the cheque.

6.Notice to stop by drawer

If the drawer has sent a notice to bank to stop the cheque, in this case the bank is bound to dishonor the cheque.

7.Drawer’s and customer’s accounts are closed

If the account of the drawer or account of the customer has been closed in this case the bank is bound to dishonor the cheque.

8.If receive is not entitled to receive

If the bank comes to know that the receiver of the cheque is not entitled to receive the payment of the cheque, in this case the bank is bound to dishonor a cheque.

7) Preclude Remarks

To conclude I can say that the customer is a person who is account holder of a certain bank. Cheques presented by customer must be honored by the bank. But if bankers find any issue in the cheque, he can dishonor the cheques. There a lot of reasons when bank also can dishonor the cheque if finds any discrepancy.

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