{"id":3909,"date":"2019-03-11T21:23:56","date_gmt":"2019-03-11T21:23:56","guid":{"rendered":"https:\/\/swaritadvisors.com\/learning\/?p=3909"},"modified":"2021-03-20T15:25:11","modified_gmt":"2021-03-20T09:55:11","slug":"dishonour-of-post-dated-cheque","status":"publish","type":"post","link":"https:\/\/swaritadvisors.com\/learning\/dishonour-of-post-dated-cheque\/","title":{"rendered":"PDC: All about Dishonour of Post Dated Cheque"},"content":{"rendered":"\n<p class=\"has-drop-cap\">In the lending world, <strong>banks \/ financial institutions<\/strong> have been a common norm insisting on borrowers taking dishonour of post-dated check as security. These post dated <strong>cheque (PDC&#8217;s)<\/strong> were <strong>astras (weapons)<\/strong> in the hands of the <strong>financial institution<\/strong> used to twist the borrowers &#8216; arm and also act as a deterrent to <strong>ensure borrowers<\/strong> are not defaulting.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_65 counter-hierarchy ez-toc-counter ez-toc-light-blue ez-toc-container-direction\">\n<p class=\"ez-toc-title\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a303c968f549\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a303c968f549\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/swaritadvisors.com\/learning\/dishonour-of-post-dated-cheque\/#What_is_PDC\" title=\"What is PDC?\">What is PDC?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/swaritadvisors.com\/learning\/dishonour-of-post-dated-cheque\/#What_are_the_main_Components_of_PDC\" title=\"What are the main Components of PDC?\">What are the main Components of PDC?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/swaritadvisors.com\/learning\/dishonour-of-post-dated-cheque\/#Are_the_dishonour_of_post_dated_Cheque_legal_in_India\" title=\"Are the dishonour of post dated Cheque legal in India?\">Are the dishonour of post dated Cheque legal in India?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/swaritadvisors.com\/learning\/dishonour-of-post-dated-cheque\/#Provisions_of_Section_138_of_the_Negotiable_Instruments_Act\" title=\"Provisions of Section 138 of the Negotiable Instruments Act\">Provisions of Section 138 of the Negotiable Instruments Act<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/swaritadvisors.com\/learning\/dishonour-of-post-dated-cheque\/#The_appeal_before_High_Court\" title=\"The appeal before High Court\">The appeal before High Court<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/swaritadvisors.com\/learning\/dishonour-of-post-dated-cheque\/#The_judgment_of_the_High_Court\" title=\"The judgment of the High Court\">The judgment of the High Court<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/swaritadvisors.com\/learning\/dishonour-of-post-dated-cheque\/#What_is_the_time_limit_to_file_a_Cheque_bounce_case\" title=\"What is the time limit to file a Cheque bounce case?\">What is the time limit to file a Cheque bounce case?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/swaritadvisors.com\/learning\/dishonour-of-post-dated-cheque\/#Why_a_Cheque_is_Dishonoured\" title=\"Why a Cheque is Dishonoured?\">Why a Cheque is Dishonoured?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/swaritadvisors.com\/learning\/dishonour-of-post-dated-cheque\/#What_is_a_Notice_of_Dishonour\" title=\"What is a Notice of Dishonour?\">What is a Notice of Dishonour?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/swaritadvisors.com\/learning\/dishonour-of-post-dated-cheque\/#Conclusion\" title=\"Conclusion\">Conclusion<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_is_PDC\"><\/span><strong>What is PDC?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>A post-dated check is a check issed wherein the issuer stated a date later than the current date. In the following situations, a post-dated check is used:<\/p>\n\n\n\n<ul><li><strong>Deliberate delay in payment:<\/strong> This is done by the <strong>issuer to delay payment<\/strong> to the recipient, whereas the <strong>recipient can accept<\/strong> it simply because the check is a <strong>firm date<\/strong> on which the check can be deposit. This situation poses a <strong>risk to the check recipient<\/strong>, as the passage of time can lead to no cash left on the <strong>bank account<\/strong> of the <strong>issuer being used to pay the amount<\/strong>.<\/li><li><strong>Collection of Methods:<\/strong> The recipient may require a set of post-dated checks from the issuer to cover a series of future payments that the recipient agrees to cash on the dates specified. This approach is used to enhance payment chances, especially when the issuer has little credit.<\/li><\/ul>\n\n\n\n<p>The <strong>Supreme Court<\/strong> <a href=\"https:\/\/en.wikipedia.org\/wiki\/Supreme_Court_of_India\">[1]<\/a>  ruled that dishonour of any <strong>post dated cheque<\/strong> issued as an <strong>advance payment<\/strong> by any purchaser cannot be regarded as a <strong>discharge of a legally enforceable debt<\/strong> or other liability and would, therefore, not amount to an offense.<\/p>\n\n\n\n<p><strong>Also, Read: <\/strong><mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/swaritadvisors.com\/learning\/procedure-to-file-cheque-bounce-cases\/\">What is the Procedure to File Cheque Bounce Case?<\/a><\/mark><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_are_the_main_Components_of_PDC\"><\/span><strong>What are the main Components of PDC?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Post-dated check simply means that it is <strong>effective from the date of signing<\/strong>. However, there are points that are important for you to know about other than the validity of the check, such as:<\/p>\n\n\n\n<ul><li>PDC can only become a check on the date which was present in the document.<\/li><li>It&#8217;s just a bill of exchange before that said.<\/li><li>The <strong>validity of the post-dated check<\/strong> is only 3 months from the date appearing on the document.<\/li><li><strong>PDC insurance<\/strong> is either as <strong>loan security checks<\/strong> or as advance.<\/li><li>Primarily to ensure its supplier&#8217;s trustworthiness.<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Are_the_dishonour_of_post_dated_Cheque_legal_in_India\"><\/span><strong>Are the dishonour of post dated Cheque legal in India?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>According to the latest decision of the <strong>Supreme Court on 138 Negotiable<\/strong> Instruments Act in a <strong>check bounce case<\/strong>, if there is an issue of PDC for any advance payment for any supply of goods, purchase services is not a discharge of a <strong>legitimate debt security<\/strong>, then it will not attract <strong>Section 138 of the Negotiable Instruments Act<\/strong>.<\/p>\n\n\n\n<p>The facts of the case was the <strong>loan agreement<\/strong> as to issue the recorded of dishonor of post-dated check.It was issued as security for payment of the loan instalment (<strong>principal and interest<\/strong>). The <strong>clause of the Agreemen<\/strong>t to be considered was &#8220;The loan together with <strong>interest<\/strong>, <strong>liquidated damages<\/strong>, <strong>interest tax<\/strong>, <strong>commitment fee<\/strong>, upfront fee prima on repayment or reimbursement, costs, expenses, and others. Monies shall be secure by depositing post-dated checks for repayment of the <strong>principal amount payments<\/strong> by the <strong>agreed repayment schedule and installation<\/strong>.<\/p>\n\n\n\n<p>It is one of the most common <strong>legal actions<\/strong> taken by lenders against borrowers and, as we all know, <strong>section 138 of the NI Act<\/strong> is the most dreaded section about checking dishonour, which could lead to a few months to the check drawer. For your ready reference, the section text is listed below:<\/p>\n\n\n\n<p>Under the <strong>provisions of the said Act<\/strong>, the <strong>legal penalty<\/strong> for dishonour of post-dated check is:<\/p>\n\n\n\n<ul><li>Imprisonment for up to 1 year.<\/li><li>A fine equivalent to twice the amount specified on the dishonored cheque or both (Post Dated Cheque ), as decided by the authority<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Provisions_of_Section_138_of_the_Negotiable_Instruments_Act\"><\/span><strong>Provisions of Section 138 of the Negotiable Instruments Act<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The <strong>dishonour of cheque<\/strong> is a punishable offense under <strong>Negotiable Instrument Act Section 138<\/strong>. Let&#8217;s understand how the act applies to the post-dated checks. According to the meaning of the post-dated check itself, once <strong>PDC<\/strong> becomes a check, i.e. from the date it is <strong>payable on demand<\/strong>, a legitimate liability is then applied as issued. But the check will only be dishonored because of <strong>insufficient funds<\/strong> or the reasons specified in the Act.<\/p>\n\n\n\n<ul><li>The check has been submitted to the bank within six months from the date on which it is drawn or within a period of validity whichever is earlier.<\/li><li>The payee or the holder, as the case may be, submits a request for payment of that amount by notifying the drawer of the check in writing within thirty days from the date on which the check is drawn.<\/li><li>The drawer of such cheque shall not <strong>make payment to the payee<\/strong> or, as the case may be, to the holder of the check within fifteen days of receipt of the said notice of payment.<\/li><\/ul>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"The_appeal_before_High_Court\"><\/span><strong>The appeal before High Court<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>The <strong>appellant approached the High Court<\/strong>, seeking to quash complaints from 18 checks with a <strong>total value of Rs. 103 million approximately<\/strong>. It was argued that the checks were issued as security and that no debt or liability was due on the same date on which the checks were issued. In other words, the post-dated checks were not to <strong>discharge existing debt or liability<\/strong>, but rather for a <strong>future amount<\/strong>; therefore, it was argued that <strong>Section 138<\/strong> of the Act was not applicable.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"The_judgment_of_the_High_Court\"><\/span><strong>The judgment of the High Court<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>The High Court dismissed the <strong>appellant&#8217;s claim<\/strong> and held that. In the present case, when the dishonor of post-dated check was issued, the loan was sanctioned and hence the same fall in the first category that in the present, but payable in the future, they were released for a debt. So I don&#8217;t find any reason to quash the complaints. These observations are of a <strong>prima facie nature<\/strong>, however, and it will be open to the party to prove the opposite during the trials.<\/p>\n\n\n\n<p>As per the latest <strong>decision of the Supreme Court on 138 N.I. Act<\/strong> in a check bounce case. if there is an issue of PDC for any advance payment for any <strong>purchase\/supply of goods\/services<\/strong> is not a <strong>discharge of a legitimate debt security,<\/strong> then it will not attract <strong>Section 138 of the Negotiable Instruments Act<\/strong>.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_is_the_time_limit_to_file_a_Cheque_bounce_case\"><\/span><strong>What is the time limit to file a Cheque bounce case?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>According to the <strong>Negotiable Instruments Act<\/strong>, a <strong><a href=\"https:\/\/swaritadvisors.com\/legal-notice\" class=\"text-primary\">legal notice<\/a><\/strong> must be sent within 30 days of the check bounce date. The case must subsequently be filed within 15 + 30=45 days from the date the <strong>legal notice<\/strong> is sent. In the event that the case is filed beyond that time is barred the same time. If you haven&#8217;t filed the case in your case, then the same time is now barred, but there&#8217;s another way out of that.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Why_a_Cheque_is_Dishonoured\"><\/span><strong>Why a Cheque is Dishonoured?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>If the banks give to pay the amount, a check is said to be honored. While the check is said to be dishonored if the bank refuses to pay the amount. In other words, check dishonor is a condition where the bank refuses to pay the amount of check.<\/p>\n\n\n\n<p>They draw in a bank immediately to issue a&#8217; <strong>Cheque Return Memo<\/strong>&#8216; to the payee banker, specifying the reasons for dishonor, when the check is dishonored. The payee banker provides the payee with the memo and the dishonored check. The payee has an option to resubmit the check within three months of the date specified on the<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_is_a_Notice_of_Dishonour\"><\/span><strong>What is a Notice of Dishonour?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>A dishonor of post-dated check is a formal notice stating that the bank will not honor the instrument by presenting a check or draft. A dishonour of post-dated check notice may be given to the instrument&#8217;s holder or presenter. The issuing institution may also give it.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>The ruling will have a far-reaching impact as thousands of <strong>check bouncing<\/strong> cases are pending in the country. Moroever, in non &#8211; recourse factoring transactions as the factors are exposed to bondholders, factors commonly use <strong>Section 138<\/strong> route as a tactic for recovery.<\/p>\n\n\n\n<p><strong>Also, Read: <\/strong><mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/swaritadvisors.com\/learning\/difference-between-director-and-shareholder\/\">What is the Difference between Director and Shareholder?<\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>In the lending world, banks \/ financial institutions have been a common norm insisting on borrowers taking dishonour of post-dated check as security. These post dated cheque (PDC&#8217;s) were astras (weapons) in the hands of the financial institution used to twist the borrowers &#8216; arm and also act as a deterrent to ensure borrowers are [&hellip;]<\/p>\n","protected":false},"author":4,"featured_media":3915,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[666,1],"tags":[1126],"_links":{"self":[{"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/posts\/3909"}],"collection":[{"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/comments?post=3909"}],"version-history":[{"count":11,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/posts\/3909\/revisions"}],"predecessor-version":[{"id":18226,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/posts\/3909\/revisions\/18226"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/media\/3915"}],"wp:attachment":[{"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/media?parent=3909"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/categories?post=3909"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/tags?post=3909"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}