RAMESH ANAND (Service) 04 March 2020

N i act 1881

Dear Sir,

I seek your guidance on a issue relating to cheque bounce case,please advise as a legal expert on banking .

A limited company issues a cheque of say of Rs 1 lac on 30.06.2019 signed jointly by company authorised signatories presented for payment by B bank

as the company did not have balance in account on its presentation date i.e. 26.08.2019 with reason marked "Exceed Arrangement"

Actual position is that these two signatories of cheque was authorised by Board of directors resolution dated 29.11.2018 to sign cheque jointly this resolution was actually cancelled by another resolution in suppression of all previous resolutions & duly submitted to the bank on 27.05.2019 under which one of these two authorised signatories was de authorised to sing cheque from 27.05.2019

The company did not bother to maintain balance on presentation date as they assume bank will automatically on seeing cheque drawn is not as per mandate and will return with mark "Signature is not as per mandate" but bank marked it return as " Exceed Arrangement" making company liable as per sec 138 N I Act

Kindly advise practically is not the paying bank responsible by wrong return marking as apparently cheque was not payable even if balance be in account so they should not marked return memo with "Exceed Arrangement'

Now can paying bank be asked by one of signatory of the company who is not liable to case u/s 138 as was no more authorised after 27.05.2019 board resolution to provide a corrigendum of return remarks with " Signature is not as per mandate instead of " Exceed Arrangement' ( because "exceed Arrangement" is secondary reason primary reason is apparently cheuqe not drawn as per mandate' so that ahe can absolve his unnecessary Liability

I shall be highly obliged for an expert opinion before approaching the paying bank for a letter of corrigendum of returning memo

Best Regards

Ramesh Anand

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3 Replies

Hemant Agarwal (ha21@rediffmail.com Mumbai : 9820174108) 30 March 2020

1. Presume the Bank return memo states "signature not as per mandate". Question arises is EVEN "IF" the signature was as per mandate, would the Bank not bounce the cheque, more so since there is no "sufficient balance" in the account.

2. What is the sequence the Bank checks: Account Balance, Validity Date, Words & Figures, Signature. Here Bank is not liable for above point no. 1. Bank would become liable, ONLY IF sufficient Balance was available and cheque was cleared without mandate signature.

3. Signatoreis of Cheque and Directors in-Charge alongwith, shall be held to be guility of cheque bounce, since Co. will not be able to prove that there was sufficient balance on date of cheque bounce, irrespective of wrong signatures.

Keep Smiling .... Hemant Agarwal
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RAMESH ANAND (Service) 30 March 2020

Dear Sir

I am not agree with your point that Company has to maintain Balance even if signature is not as per mandate in that case if some one submitted cheque with forged signature then as per your assumption as per Signature is not as per mandate How the Company would be liable for maintain the Balance ? More over when the Company knows that if that no cheque as per mandate was issued then how it will they ensure to maintain the Balance

Section 10 of Negotiable Instrument Act makes banker liable if the Cheque so presented was not paid as per apparent tenure and when prima facie when it was not as Company mandate then how company monitor if someone presented forgly the cheque in thier accoount and why company shall monitor the balance for a unkown attempt when the cheuqe is not as per mandate

same when the Company has changed the authorised signatory it is the responsibilty (particularily when it is in payee notice that signatories is chnaged) to get the cheque replaced with the duly signed signatory and in that case when company has changed signatory the Comapny how can maintain the Balance and Bank must represent to the returning memo that signature is not as per mandate that mean direction to payee to get it signed as per mandate

Hemant Agarwal (ha21@rediffmail.com Mumbai : 9820174108) 30 March 2020

1. I did not ask you to "agree" with me .OR. "not agree" with me.

2. What you are trying to do is to create a "debate /argument", which is not within the scope of this Forum and neither am I interested in debating or arguing.

3. What I stated was my perceptions /view point, to your general query. PERIOD.

Keep Smiling .... Hemant Agarwal
VISIT: www.chshelpforum.com