POST DATED CHEQUES

 PDC – IS A CAKE ONE CANNOT HAVE IT AND EAT IT TOO!

  

      I am sure many of you would have lent money and taken Post Dated Cheques as security.  But do you
really know how safe this practice in the eyes of law.

 

It is no doubt that as per Section 138 of Negotiable Instruments Act dishonour of cheque attracts criminal punishment including imprisonment. But this provision does not come without legal tags attached to it. Let’s see one of the recent landmark judgement by SC in case of PDC.

 

In the instant case** Ramesh lent Rs.1,000/- on 01.01.2022 to Suresh repayable in 90 days and took a PDC dated 31.03.2022 as security. But in the period between 01.01.2022 to 31.03.2022 Suresh repaid Rs.10/- but failed to pay the balance Rs.990/- on 31.03.2022.   So Ramesh presented the cheque for Rs.1,000/- on 31.03.2022 which eventually got dishonoured. Now question of law that was decided by SC was ‘whether Ramesh can sue Suresh under Negotiable Instrument Act – Sec 138for cheque dishonoured?  The answer was big ‘No.

 

**Figures & names in the case law presented above altered for the sake of simplicity.]

 

SC in its judgement observed that cheque presented was Rs.1,000/- whereas the actual legal debt outstanding was only Rs.990/-.  SC also observed that ideally Ramesh should have endorsed in the back of the cheque that Rs.990/- has been repaid and advised the Bank to negotiate for only Rs.990/- which he failed to do.

 

This new judgement would be interpreted mischevously by the likes of Suresh who will pay a very small amount as part payment and get rid of the clutches of law.   

 

Hence, while presenting such PDCs always take proper legal advise.

 

PDCs are no more a cake that you can have it and eat it.

RJB

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