M.S.Yatnatti Editor Property Politics
STEP-BY-STEP GUIDE FOR “LEGAL RECOURSE” IN RESPECT OF “DISHONOUR” OF ELECTRONIC FUNDS TRANSFER & DISHONOUR OF CHEQUE
by Admin User - Sunday, 4 April 2021, 05:21 PM
 

By: M.S.Yatnatti: Editor and Video Journalist Bengaluru: According to financial experts ,The law relating to negotiable instrument is the law of commercial world legislated to facilitate the activities in trade and commerce making provision of giving sanctity to the instruments of credit which could be deemed to be convertible into money and easily passable from one person to another. In the absence of such instruments, including a cheque, the trade and commerce activities, in the present day would, are likely to be adversely affected as it is impracticable for the trading community to carry on with it the bulk of the currency in force. The negotiable instruments are in fact the instruments of credit being convertible on account of legality of being negotiated and are easily passable from one hand to another. To achieve the objectives of the Act, the legislature has, in its wisdom thought it proper to make such provisions in the Act for conferring such privileges to the mercantile instruments contemplated under it and provide special penalties and procedure in case the obligations under the instruments are not discharged.

RBI Guidelines on Dishonour of electronic funds transfer for insufficiency of funds in the bank account :Reserve Bank of India vide its circular no. DOC/2011-12/191 DPSS. O.PD.No.497/02.12.004/2011-12 issued on 21 September 2011 have highlighted that section 25 of the Payment and Settlement Systems Act, 2007 accords the same rights and remedies to the payee (beneficiary) against dishonour of electronic funds transfer instructions for insufficiency of funds in the account of the payer (remitter), as are available to the payee under section 138 of the Negotiable Instruments Act, 1881.The sub-section (5) of the section 25 of the Payment and Settlement Systems Act, 2007 provides for punishment of two years and twice the amount of electronic funds transfer instruction, or both for dishonour of such electronic funds transfer on par with the penalties stipulated for dishonour of cheques under the Negotiable Instruments Act, 1881.This information is published to boost the confidence of customers in electronic payments by allaying any apprehensions on the rights and remedies available to payees against dishonour of electronic funds transfer instructions.

What is the process for clearing a cheque in India?: Reportedly The clearing process Starts with the deposit of a cheque/other clearing instruments in bank 1. The bank 1 arranges the cheques submitted to it for clearing bank wise and presents it in the clearing house. Upon receipt of the cheques/other instruments, they are passed for payment if the funds are available and the banker is satisfied about the genuineness of the instrument. The said cheque/other clearing instruments is then passed for payment to the beneficiary customer in bank 2.

The cheques that are unpaid are returned to the presenting bank through another clearing called the Return Clearing.Central Clearing House: The clearing house is a voluntary association of banks under the management of a bank where the settlement accounts are maintained. Wherever Reserve Bank of India has its office (and a banking department), the clearing house is managed by it. In the absence of an office of the Reserve Bank, the clearing house is managed by the State Bank of India, its associate banks and in a few cases by public sector banks.Settlement Bank: The aggregate amount or value of cheques presented by a bank 1 on bank 2 represents the claim by that bank 1 on bank 2. Similar claims are made by all the banks on every other bank in the clearing. A net settlement is arrived at the clearing house and the debit or credit position of the bank is determined. These are booked in their current accounts maintained by the settling bank.A typical cheque is credit to the beneficiry’s bank account on the 3 working day, here 1st day would be the day of deposit of cheque, 2nd day clearing and 3rd day for crediting the same.