When cheques are lost in transit; the onus is on you
People often get confused by the Madhya Pradesh Court 2005 judgment, which avers that the bank is bound to pay the value of the cheque lost in transit. There is a subtle difference here. The judgment refers to cheques deposited in your account which the bank lost during the clearing transit process. Ensure to retain the acknowledged copy of the pay-in slip indicating the cheque number. That is proof enough and the bank has to compensate you if the cheque falls into wrong hands. In this case, the bank has to compensate you if the cheque gets misused and also pay you compensation if any of your issued cheque gets dishonoured as a result.
However, the real issue is more complex. What happens if the cheque sent to a client by mail gets lost in transit? That is a bigger problem because, in this case, the onus is on you since the cheque has been issued from your account.
Seven steps to take if your cheque gets lost in transit
The risk with lost cheques is that it could fall into wrong hands. Today, cheques can be credited into another similar account or it can also be discounted with a shroff. These 7 steps can help you handle such a situation.
- Remember to always send high value cheques only by registered post or EMS. In case of private couriers, prefer established names like Blue Dart, which provide real time tracking. Ideally, any courier within India must reach in 48 hours, failing which you must immediately take up the matter with the courier.
- Normally, the courier is able to track the package and give you an update and assure that it will be delivered in 24 hours. You must not wait beyond that because then there is a major risk of the cheque being misused.
- What if your cheque falls into wrong hands? One of the best ways to avert the risk is to issue the cheque with receiver’s bank mandate. For example, if your client has an Account Number – XXXXXX with Bank of India, mention that as part of the cheque so that the payment can only be made into that particular account. It is almost impossible to misuse such cheques.
- Issue an immediate stop payment instruction when you realize that the cheque has not reached by the scheduled time. The first thing you need to do is to inform the recipient of the cheque that you are issuing a stop payment. You can explain the reason and undertake to transfer the funds by RTGS instead.
- The request for stop payment can be given offline or online. You can just log into your net banking account and stop that particular cheque number. You can also walk into a branch and give written request for stop payment. You can also authenticate yourself and issue stop payment via phone banking. In case of online or phone banking stop payment, retain the acknowledgement reference number. In case of physical request, get acknowledgement on a photocopy with the time stamp.
- Stop payment works if the cheque has not yet gone into clearing. If the cheque has already gone into clearing, then it can get a little more complicated. You can ask your banker to intimate the recipient bank based on IFSC code to block the use of these funds. This may not be accepted by many banks and may require escalation.
- If these steps fail and the cheque gets into the wrong account, then you must adopt the legal route. File a written complaint with your bank HO explaining the fraud so the bank can immediately intimate the RBI. This issue is later taken up with the receiving bank and a criminal case filed against the account holder. This can be a fairly lengthy process.