Let’s start with the cheque itself before we get into the definition of a post-dated cheque and why they’re issued.
What is the definition of a check?
A cheque is a bill of exchange drawn on a specific banker and made payable on demand. It includes a printed form as well as an electronic cheque. A cheque is a type of bill of exchange that instructs a bank to transfer funds from one person’s account to the account of another individual or company in whose name the cheque was issued.
According to Section 2(h) of Negotiable Instruments Act 2034 a cheque is a Promissory Note that requires the bank to pay the cheque holder. Similarly, the Sixth Edition of the Delex Black Law Dictionary defines a cheque as “an instrument in writing containing an unconditional order signed by the maker directing a certain banker to pay the sum on money on demand to the order of a certain person.”
A cheque in this context means that payment is made to the cheque-holder without any conditions. It’s a no-questions-asked order. Imposing any conditions on it is not legal. It is not covered by the terms of the check. According to section 2(g) of the Negotiable Instruments Act 2034, if the defendant accepted the cheque knowing that there were no deposits in the account and if the individual gave the cheque mentioning the back date cheque, it is only referred to as a Promissory Note.
What is the definition of a post-dated cheque?
A post-dated cheque is one that has a future date printed on it. In simple terms a post-dated cheque is one that is drawn on a date that is later than the date the cheque was written. A post-dated cheque is not a “cheque,” because a cheque is a demand payment instrument. The definitions clearly distinguish between “a cheque” and “a bill of exchange.” As a result, the phrase “cheque” followed by the phrase “Holder in due course” cannot be used on a post-dated cheque. where it was held that a post-dated cheque does not become a cheque until the date printed on the face of the said cheque.Only when the post-dated cheque becomes a “cheque,” with effect from the date printed on the face, does it become a “cheque.”
What exactly is a stop-payment cheque?
In Nepal, if a cheque is issued and then lost or stolen, a request is made to the bank to stop the cheque and the payment is halted.
A stop payment request instructs your bank to cancel a check before it is processed. After you request a stop payment, the bank will suspend the specified cheque, and anyone attempting to cash or deposit it will be denied.
Legality of Post–Date Cheque Legality
According to the Negotiable Instruments Act, such a cheque is not required to be paid. According to section 2(g), it does not fall within the scope of the Negotiable Instruments Act. There must be a situation of the payment to be made in order for it to be considered a cheque; in the case of the post date, there is no such thing. A post date cheque is one that is issued with a date that is 5 or 6 days later than the issued date. Until the payment is made Post Date, the post date cheque is considered a promissory note.
According to Negotiable Instruments Act 2034 2(g), a Promissory Note is a letter mandating payment to a cheque holder on the specific date specified on the cheque and to a specific person who is mandated to receive it without any conditions, and the cheque issuer’s signature is printed. However, the term “loan deed” does not refer to a deed in accordance with the Civil Code. A post-dated cheque is considered a cheque because it is required to be paid on the specified date on the cheque.
Legality of stop-payment cheque in Nepal
Cheque dishonor is defined as “payment stopped by drawer, the bank returns the cheque, or the cheque bounces.” In such a case, the court considers the issuer’s intent as well as whether the stop payment instructions issued were genuine or not. The Negotiable Instruments Act of 2034 intends to punish only those who, despite knowing they have no money in the bank, issue a cheque in discharge of debt or liability. The cheque is considered Bounced under the Negotiable Instruments Act of 2034 when an individual first provides the cheque and then claims that it was lost and stops the cheque.
However, depending on the circumstances, the cheque could be stopped.
Consider a situation in which a cheque is issued in favor of a supplier who delivers goods that are found defective by the consignee before the cheque is encashed, or a post-dated cheque to a builder after which the apartment owner may notice breach of agreement for a variety of reasons.
In that case, it is not uncommon for the drawer of the cheque to legitimately stop the payment, raising the issue of breach of contract and, as a result, whether this would constitute an offense under the Negotiable Instruments Act 2034. Another case in point is when a check is issued in the name of a hospital that agrees to treat the patient by operating on the patient or using any other method of treatment, but the doctor fails to show up and operate, and the patient dies before the treatment is administered.
Following that, if the payment is halted by the drawer of the cheque, the obvious question is whether this is a violation of Section 107 of the Negotiable Instruments Act 2034
Alpana Bhandari is a founding partner and CEO of Prime Legal Consultants and Research Center. She graduated from American University Washington College of Law. She specializes in corporate/arbitration and family law.
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