Can You Encash A Cheque After The Death of Drawer?

INTRODUCTION:

India is the country with the second largest population in the world,(135.26 crores as of 2018) is witness to a population explosion that includes an almost uncountably high rate of both births and deaths every single day. And in connection to this huge population, it is imperative that cashing a cheque is one of the most primary procedures that take place in economic transactions all over the country. In regard to this, it is also noticeable that India as a country is not entirely digitalized in all possible aspects -although there have been recent developments over digital procedures, the major manpower of the country, with a considerably large chunk of illiterate and poor population, look up to manual systems primarily be it in economic or any other sector. Keeping the above-mentioned points in mind, it can be observed that cashing a cheque can clash with the death of either party during the time of the procedure – and this hence remains of the most common yet lesser discussed aspects that are intended to be brought to light here.

THE CONCEPT OF CASHING A CHEQUE:

A cheque is a document used to transfer money from one person or organization to another person through the medium of a bank.

As per Section 6[1] of Negotiable Instrument Act, “A cheque is a bill of exchange drawn on a specified banker and not expressed to be payable always on demand.” Here, the drawer and payee may be the same person.

ESSENTIALS OF A CHEQUE:

  1. It must be in writing, it cannot be oral
  2. There must be an order to pay the amount
  3. Such order for payment must be unconditional
  4. Drawee must be a certain bank
  5. The amount to pay must be fixed/certain
  6. A payee must be certain
  7. A cheque is payable on demand only
  8. It must be signed by the drawer. An account holder of the bank can draw the cheque.

The validity of cheque remains for three months from the date of issuing the cheque. These essential things need to be compulsorily there in a cheque to justify its validity.

PROCEDURE OF CASHING A CHEQUE IN DIFFERENT SITUATIONS:

According to the basic procedure of encashing, if one person or an organization writes a cheque for another organization or person, the receiving party needs to go and submit the cheque to the back, where the amount in the cheque can be cashed, provided it fulfills the proper criterion.

However, problems in the encashing can arise in exceptional situations like:

  • If there happens to be any kind of spelling mistake in any spellings of the currency or name, or even in a signature, that can possibly indicate any fault
  • In service, where the cheque is drawn by an organization for an employee that was actually due, but if the cheque reaches the receiver to find he is deceased, then problems will arise regarding the encashment of check, namely two situations wise.

In this situation, the legal heir can go to the drawer and can claim the money of the deceased by showing proper documents of a death certificate, provided that the account of the deceased in the bank has been closed.

In this situation, if the account of the deceased is not closed yet, then the encashment can be done easily, without any issues.

In a hypothetical situation of a transaction between A and B, B bought something from A. After that B issues cheques on different dates for making payment to A -from these, 2 cheques got cleared, while 3 cheques were uncleared. Following this, A intimidated B to clear up all three cheques. However, no response was received and it was found that B had died. So, hypothetically, two situations can arise from here:

  1. Without legal interference, A intimidated the legal heirs of B to fulfill the payments left due by B with proofs of transactions through documental evidence.
  2. In this situation, A brought in legal inference, and suit for recovery was filed against the legal heirs of B, as a criminal liability upon the legal heirs cannot be charged.

However, an exceptional situation can arise, if B died in the middle of the criminal proceeding. Here, B, before death, had been charged with Section 138[2] and 142 of Negotiable Instrument Act. No criminal liability arises on legal heirs if A, asks for the payment in court.

To prove this exception, there is a case supporting the same: Shankarlal v/s Sanyogita Devi[3]– In this case, Supreme Court held that there is, therefore, no reason on principle to hold that a complaint filed by a legal heir of the original holder due course of the cheque cannot take cognizance by the court. In view, neither the cause of action nor the right conferred upon the holder in due course of the cheque to proceed and file a complaint under section 142 of the act for the offense under section 138[4] of the said act comes to an end after the death of the holder in due course of the cheque.

Considering the situation if A dies in the middle of the legal proceeding, one option can arise only where the lawyer of A made an appeal under Section 256[5] of CrPC where the deceased cannot be deemed possible for a court session. Herein, the legal heirs of Aare responsible for carrying out his duties and made an appeal in court for Section 302[6] of CrPC permission to conduct the prosecution. The criminal liability shall remain the same against B. To prove this situation,  a case can be provided: Chand Devi Daga and Ors v/s Manju K. Humatani and Ors. [7]

In this situation, two options arise, that is, either

(I) the cheque is cashed within the validated time, or if the bank informs prohibiting encashment, the legal heir can apply for receiving of the cash by the nominee only, with a proper death certificate.

(ii) Or, the organization is informed with the death certificate and proof of relationship with the deceased wherein the legal heir can claim the money.

CONCLUSION:

As per the above discussion, thus, we can observe how the encashment of a cheque is such a common occurrence in everyday economic activities of India, yet it remains one that offers the most varied amount of situations. Evidently, the variation of situations comes from the death of either of the two parties to the transaction. Therefore, this constitutes a range of situations as well as problems, that need much more closure than they are readily offered. Where, on one hand, digitalization can cater to some of these problems over the promptness of time and speed, yet encashment of a cheque in the relation of deaths shall and will remain a topic worthy of queries and discussions for a long time to come.

References:

[1]Negotiable Instrument Act, 1881

[2]Negotiable Instrument Act, 1881

[3]CRML No. 485 of 2002

[4]Negotiable Instrument Act, 1881

[5]The code of criminal procedure, 1973

[6] The code of criminal procedure, 1973

[7]2018  1 scc 71

This article is authored by Dishant Arya, Fifth-Year, B.A.LL.B student at Vivekananda Institute of Professional Studies.

Also Read – How Many Times A Cheque Can Be Bounced?

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