Understanding Cheque Return Procedures and Recovery Options

When a cheque is returned, many wonder whether the bank will give the returned cheque back to the payee. This article comprehensively explains the typical processes and procedures involved when a cheque is returned, the legal options available, and the steps that can be taken to recover the funds.

The Typical Process of Cheque Return

Typically, when a cheque is returned by the payee's bank for insufficient funds or another reason, the bank does not physically return the original cheque to the payee. Instead, the bank sends a notification—either in writing or through an electronic memo—indicating the reason for the return. This notification helps the payee understand why the cheque was not honored.

The payee can request a copy of the returned cheque from the bank. This request is usually fulfilled by sending a photocopy or an electronic image of the returned cheque. However, the original cheque remains with the bank and is not typically returned to the payee.

If the payee requires the original cheque for any reason, they may need to communicate directly with the issuer of the cheque to obtain a new one. Direct communication with the issuer can be crucial in situations where the payee needs the original document urgently.

Legal Options for Reclamation

In cases where the payee is a presenter of the cheque and the cheque has been returned (for instance, due to non-payment or bouncing), the payee has legal recourse. The remaining issue lies in recovering the money that is due from the drawer. Here, the original cheque serves as proof of the transaction.

The payee may request the bank to return the cheque or an image of the cheque along with a reason memo. This memo provides the payee with the legal option to file a cheque return case or even a criminal case if the situation involves fraud or deliberate dishonor of the cheque.

Legal Guidelines and Procedures

For a detailed understanding of the legal procedures and guidelines, it is important to refer to the Reserve Bank of India (RBI) guidelines issued in 2003. These guidelines have remained largely unchanged, with some minor modifications introduced in 2009. The RBI guidelines provide a comprehensive framework for dealing with returned cheques and the recovery of funds.

The guidelines issued by the RBI in 2003 are notable for their clarity and practicality. While the process can still be complex, these guidelines help account holders and presenters navigate the legal and procedural aspects involved in recovering the funds.

According to the RBI guidelines, if the payee is the presenter of the cheque, the bank should return the physical cheque or an image of the cheque along with the reason memo. This ensures that the payee has all the necessary documentation to proceed legally.

The payee can also opt to visit the bank branch where the account holder's communication address is registered. This provides another avenue for the payee to recover the cheque and proceed with legal action if required.

Conclusion

Understanding the procedures and legal options in cases of returned cheques is crucial for both payees and presenters. By adhering to the guidelines issued by the Reserve Bank of India and directly engaging with the bank or the issuer of the cheque, one can effectively navigate the complexities of dealing with returned cheques and the recovery of funds.

It is important to note that the legal action of recovering funds through a returned cheque can be achieved by retaining the original cheque as proof and initiating a legal process if necessary. The availability of the cheque or a copy, along with the reason memo, can significantly aid in this legal process.