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Tuesday, January 24, 2012
Cheques Validity Cut Short
We all know what a cheque is and how to use it. You can revisit the post titled “Using a Bank Cheque” to know more about the same. To revisit the post click here
Ok, coming back to topic, as you might already know, Cheques have a validity period after which it is worthless. Such a cheque is called a STALE cheque or an EXPIRED cheque. If you had read my previous post, you will know that cheques are valid for 6 months or 180 days from the date of cheque issue. However, with a recent RBI Ruling, this is set to change.
Reduction in a Cheques Life-Span
Starting 1st April 2012, all cheques and drafts issued by banks in India will be valid only for 3 months. This essentially means that, you can cash cheques or drafts only for 90 days from the date of issue (date on the cheque) and beyond the 3 month duration, the cheques are considered stale and would be worthless.
Why this sudden ruling?
The Reserve Bank of India (RBI) has said that, some people were taking undue advantage of this long (180 day/6 month) validity period and floating/circulating these instruments in the market like cash. So, in the interest of public safety, the RBI has reduced the validity of such instruments to 3 months from the date of issue.
From When is this Validity Ruling Effective?
All cheques and drafts issued in India dated 1st April 2012 or later will have this validity ruling. Banks will also have to mention this 3 month validity condition in all cheques and drafts issued by them.
How does this affect us?
If you are someone who uses cheques for making payments on your credit card or for an occasional transaction with a friend or a relative, this ruling has no effect on you. In almost all cases, we usually cash the cheque as soon as we get it. However, for people who accept post dated cheques for loan repayments or for any other reason, this ruling comes as a huge blow. They have to closely track the expiry date of these instruments and cash them on time in order to receive the payment.
Happy Using Cheques!!!
Thanks for the info Anand!
ReplyDeleteWhat about the cheques which were issued before 1st April; lets say on 1st of Jan 2012? Are they still valid for six months?
Thanks again!
Rishi
There is not much clarity on that part but I am assuming that, they must be valid for the original 180 day period if the date of issue was before 1st April.
DeleteIf you have such a cheque, you can take it to your bank and check with them. They should be able to give you the accurate answer.
Anand
It is incorrect to say that the cheque will become "Worthless". Cheque which is dated beyond 3 months is still an evidence of debt and only change is that Bank cannot be considered to have made a payment in due course if it pays a cheque beyond 3 months. It only affects the contractual binding of the banker to make payment. The beneficiary can demand that the drawer issues him a new cheque or re validates the cheque.
ReplyDeleteThe term worthless refers to the monetary value for the cheque. You can only ask for a replacement cheque if the cheque bounces due to lack of money in the other parties account not if you forget to cash it for 6 months and then one fine day realize that the cheque is stale.
DeleteIt is a contractual agreement but the liability is only if the cheque bounces due to lack of insufficient funds or for any other reason within the first 3 months from the date of cheque issue. After 3 months the cheque itself is worthless.
If the person who gave you the cheque is a good guy he can give you a replacement but you cannot demand it because - not depositing the cheque on time is your mistake and the other party wouldnt face any legal consequences out of your mistake.
Note: The legal consequence part is my understanding of the Indian banking/legal regulations. If you have proof that you can demand a replacement cheque if you fail to cash the cheque on time, then do share the info here for everyones benefit.
Anand
Yes, Cheques dated before 1st April 2012 are still valid for 6months, only 1st April 2012 & after the validity reduces to the new 3 months.
Deletei have a cheque dated 12 march 2012. what would be the due date for the cheque??
DeleteThere is no such thing as a due date for a cheque. There is only a validity or expiry date which will be 180 days from date of issue (As this cheque was issued before 1st April 2012)
DeleteI received a post dated cheque with date as feb, 2013. Is it legally allowed to issue post dated cheque with 7/8 months ahead?
ReplyDeleteOn a Goodwill basis - Yes. For ex: I borrow money from you today and tell you that I will get money next year and as a good friend you agree to take the money back next year, I can give you the cheque today itself.
DeleteYou cannot cash it now, but it is proof that I owe you some money. You can cash it only after the date mentioned (The specific date in Feb 2013).
However, RBI has asked all banks and customers to stop issuing post date cheques going back more than a few days however there is no concrete rule as such stopping people from doing so.
hey....I have a cheque issued to me 3 months back. As i was not aware of this 90 days rule i did not cash the cheque. But the person who has issued this cheque is the manager of my college and i know him very well so is it possible for me to get a new cheque from him by handing him over the old cheque???
ReplyDeletePLS reply ASAP.
Hi Anonymous,
DeleteYou can ask him for a new cheque and if he is willing he will give you a replacement. However, the decision here is the other party's and you cant do anything for force him.
Unfortunately, as per the law, the person who gave you the cheque is not liable to replace the cheque that you missed encashing. The mistake here is yours and you can only request the other person to give you a replacement.
As the person is in a respectable position, I dont think they will refuse to give you a replacement but legally you cannot do anything if he refuses to give you one.
Anand.
IMHO, if they are liable to pay you for a transaction, then the fact that the previous cheque was not encashed in time can't be the reason they can deny the payment. In other words, you can always argue that the cheque was misplaced (which is humanly possible) and request a new cheque or alternative payment. If there is a legal ground for what you are saying (e.g., references to prior judgements)?
DeleteHari - legality of a statement is always subjective to how good a lawyer you can hire. I gave you a cheque which is valid for 90 days. you did not cash it (could be due to an umpty number of reasons) which doesnt make me accountable to give you another cheque. As I said, me being a good person I could give you another cheque but there is nothing that can force me to reissue your cheque because I never denied payment. You failed to receive the payment which doesnt make me legally liable.
DeleteAnyways, I dont have any law books or anything to justify the point I said which is based purely on experience. You can consult a good lawyer if you wish to get actual legal opinion :)
THANKS ANAND.... But why don't the banks mention the validity period on the cheques to create awareness??? I don't know about other banks but ING vysya has not mentioned it on my cheque.
ReplyDeleteYes, that is exactly why the government and RBI came up with the concept of Cheque Truncation System or CTS wherein the banks are supposed to print the validity of the cheque as well as include a lot of safety features. There was an article titled Cheque Truncation System in our blog just a few weeks ago. You can Click Here to read it or search for it in the right hand side list of articles bar.
DeleteAnand
I had a cheque dates 26th april 2013.......I presented it to my bankers on 25th July 2013.....The cheque bounced and reasons on memo state 1) Payment stopped by drawer 2) Instrument Outdated / Stale.
ReplyDeleteWould request you to clarify for me and for others too to be aware
1) Presenting on 25th July is within 3 months. But sent by my bank for clearing next day 26th July made the cheque stale. Pls clarify after reading below.
( RBI circular dated 4/11/2011 ( states "BANKERS SHOULD NOT MAKE PAYMENT OF CHEQUES /DRAFTS/PAYORDERS/BANKERS CHEQUES bearing that date or any subsequent date, if they are presented BEYOND THE PERIOD OF THREE MONTHS FROM THE DATE OF SUCH INSTRUMENT.)
Point : a) RBI doesnt say 90 days but says 3 months b) its says 3 months beyond the period of 3 months from date of instrument thus 26th april + 3 months = 26th july -------date beyond this
2) Even if cheque is stale why has then bank ticked PAYMENT STOPPED BY DRAWER as that question should not arise if cheque is stale. What recourse do i have aassume i cannot go back to drawer and the debt is a legally enforceable debt.
Will appreciate sincere and legal advice.
Rgds
Anonymous
DeletePlease contact a competent lawyer for the correct legal advise. I can give you only a sincere advise based on my experience...
1. The date a cheque is submitted for clearing/payment is the date that will be considered for payment. cheques are only sent the next day for clearance and hence the 3 month period is already over. Usually for these kind of date limitations the dates are not considered inclusive. 3 months means your cheque is invalid by end of 25th july.
2. Are you sure the guy who gave you the cheque did not issue a stop payment on the cheque? It could simply be a confusion in terms of words. By default the bank is requested to stop payment on behalf of the drawer in terms of old cheques. So, this is what they are trying to say. Anyways you can double check with your bank on the reason as to why the cheque bounced.
Firstly - waiting till the last moment to deposit a cheque is a bad idea. right now the guy who gave you the cheque is under no obligation to give you a fresh cheque because it was your fault in waiting for 3 months to use the instrument. You can on a goodwill & personal basis request them for a new payment. However, do check with a lawyer to be sure on this.
Anand
i am given cheque to my company for a bond. company can legal action on me after cheque's validity for pay to new cheque ?
ReplyDeleteMayur,
DeleteWhen company's ask for cheque as a bond they usually dont accept cheques with a date in it. Technically after the cheque expiry, you have no liability to the company even if the cheque bounces.
If you have signed any agreement with your company that says you will replace the cheque if it expires then they can take legal action on you if you dont do so. Otherwise they cannot.
Anand
Dear Sir,
ReplyDeleteI want to know can I file a case or not if the validity of cheque expired
I got a cheque from my party dated 26/04/2013 amounting rs 100,000/-
This delay happened due to fake promises of payment made by the opposite party, may be intentionally.
Please guide me what legal action I can take against them.
Thanx &n regards,
Yusuf Shaikh
Faiz - For Legal Advise you need to consult a lawyer. If the cheque was given to you in april, the first thing anyone would ask is, why were you waiting until now to deposit it... If a cheque bounces before it expires then it is the fault of the guy who issued it whereas in this case the fault is yours legally.
DeleteBetter talk to a lawyer to get things sorted out.
Anand
whether we want to present the cheque in the drawees bank in 3 months? or in the drawers bank (nationalized bank) is enough? Any ruling in this regard?
ReplyDeleteAs far as I know, the limit is 3 months for a cheque and this is for both banks.
Deletehi sir , i deposited a cheque in sbi (outstation cheque of SBH cheque date 13th nov) i deposited @ 21st november, but they sent it to Hyderabad @ 15th december,..... cheque returned and they said .....it is bank mistake that thay have to send it to patna state capital from begusarai branch . ...they again send it to patna @ 5th january.... 12 january is the validity of cheque. i complaind against it acording to the process of sbi & network officer but no reply i got from them.
ReplyDeleteSir my query is ... will the cheque be cleared after the date lapse within the bank
and this is the scholarship amount & my collage will not give me again. ... than who is responsible... may i go for banking ombudsman releted to this if it will not be cleared.. pleae reply
Your cheque will be valid for 3 months from date of issue and assuming cheque date is 13th feb it will be valid Until 12th Feb and so if it is processed within that date, it should be ok.
DeleteIf the bank fails to process until then, do you have proof that you deposited on 21st nov? If so, you can go to the banking ombudsman and complain
thanks to reply sir. i have proof my reciept,
Deletei Have a cheque dated 14-11-2015. Is it valid on 12-02-2016 .
ReplyDeleteI Ask Question beacouse 90 days complitted on 11-02-2016. bt the three months not complited . Kindly Give me advice PLZ .
Hi, i think it should be valid since 3 months is not completed but pls confirm with your bank
DeleteHi, I want to know that if anyone given cheque to finance company and company wants to use this cheque after 6 years. Whether company is competent to draw this cheque.
ReplyDeleteIf the cheque has a date - No. If no date - Yes
DeleteHi, I have purchased a property from a well known person. My final due was agreed to be paid by cheque and register with mutual agreement and same was drafted in the sale deed draft along with cheque details. Later within 2 days I have paid the due by cash and deed draft was modified accordingly. However while registering the property just a day after paying him in cash, he has changed the sale deed with cheque number without my knowledge which I am getting to know now from the broker (It was done while we were waiting in registrar office) and he still holds the cheque which I unfortunately didnt collect and he is not willing to return now may be save tax showing loss but !!
ReplyDeleteAm I in trouble? Any suggestions?
Is the cheque dated? If so it will expire automatically. If not, you can try to call your bank to stop payment on the cheque but note that if the builder claims you never paid him & owe him this money you maybe in trouble with police. Talk to the guy and get your cheque back to be safe
DeleteONE FRAUD PARTY GIVEN A CHEAUQE AGAINST OUR FIRM DUE PAYMENT . SIR WE DEPOSITE THIS CHEQUE AGAINST OUR PAYMENT IN BANK BUT BECAUSE OF INSIFFIENT FUND THE CHEQUE IS BOUNCED AND THE CHEQUE WAS ISSUED AT 17/04/2013 AND BOUNCED IN 17/07/2013 WE GET TO MEMO FROM THE BANK THAT
ReplyDelete1. INSIFFICIENT FUND THE CHECK BOUNCE
2. STALE CHEQUE.
SO SIR CAN YOU GUIDE US REGARDING THIS MATTER ACCORDING TO RBI GUIDELINES SO WE CAN DO THIS IN OUR FAVOUR.
Since bounce date is 3 months from cheque date, reason 2 may be the cause in which case you will most likely not have any legal grounds because you should've deposited immediately instead f letting the cheque expire
Deleteanyways, pls consult a good lawyer they can help