Talking Law With Ivie Omoregie: The Law Regulating Bounced Cheques

Recently a friend came to me lamenting. She sells tiles to construction companies and recently had a game-changing transaction: She was to supply a certain amount of tiles to a well-known construction company on the agreement that she would receive payment within 30 days of the supply.

In her haste to fulfil the order, she borrowed tiles from her supplier, promising she would pay the supplier within 35 days. The supplier insisted that she issue postdated cheques for the full outstanding amount, bankable at the end of the 35-day grace period.

To cut a long story short, my friend has still not been paid by the construction company, so her cheques to her supplier bounced. This resulted in her spending the bank holiday weekend in KiriKiri prison and is now out on bail pending determination of the case.

In my last article I discussed the concept of debt and touched on the fact that issuance of a bounced cheque is actually a criminal offence. In this article, I want to shed more light on this, as I believe it is a mistake anyone is capable of making.

Why Are Bounced Cheques Illegal?
Issuance of bounced cheques is a criminal offence under Section 1 of the Dishonored Cheques (Offences) Act 2004; the act makes it an offence for any person anywhere in Nigeria to induce the delivery of any property, obtain credit or to attempt to settle a lawful obligation by means of a cheque which, when presented within a reasonable time, is rejected by the bank on the grounds that there are either no funds or insufficient funds in the account of the person issuing the cheque.

Elements Of The Offence

• The person obtained credit for himself or any other person;
• The cheque was presented for payment within three months from the date of issue of the cheque; and
• Upon presentation of the cheque it was dishonored on the ground that no funds or insufficient funds were standing to the credit of the drawer of the cheque in the bank on which the cheque was drawn.

A Bad Debt Is Not A Criminal Offence
Generally, the owing of a debt is customary in business dealings, thus a bad debt is not a crime. In essence, the refusal or failure to pay back a loan/debt, even though a wrong and unfortunate act, can only be remedied by a civil action and not ‘typically’ with the involvement of the police; the invitation of the police in a matter that is purely civil in nature should not be justified or permitted under any circumstances.

Repercussions Of A Bounced Cheque
Under Section 1 of the Dishonored cheques (offences) Act 2004, persons affected by the issuance of a bounced cheque are entitled to make a report to the police, as this is a criminal offence.

Upon being invited for questioning, where it is determined that the accused debtor did in fact intentionally issue a bounced cheque and is responsible for the debt owed, the procedure applicable in the case is a Summary Trial. This means that the trial will be by way of affidavit evidence only and the court will use a quick and shortened process in determining the matter.

Persons found guilty of this offence shall be sentenced to imprisonment for a period of two years without the option of fine.

However, where a debtor can show that at the time of the issuance of the cheque he validly believed that the cheque would be honoured, if presented within the stipulated time, then he shall not be guilty of an offence.

Please note that when the bank dishonours the bounced cheque, it is important to insist that the bank returns the cheque by making all the proper entries and annotations in their register and on the returned cheque, as this may be required as evidence in court later.

I must also stress that when dealing with a matter concerning bounced cheques, each and every bounced cheque is a criminal offence in itself, even though originating from the same transaction. Thus, it is possible where the debtor has issued 5 bounced cheques for the repayment of credit in a transaction for the creditor to go to 5 different police stations, to file five different complaints, and for the debtor to be arrested and imprisoned 5 different times, for cheques pertaining to one transaction.

As for my friend, owing to the fact that she did have original agreements between herself and the construction company, her supplier eventually dropped the charges; my friend came to an understanding with her creditor and was advised in the future not to issue such cheques again.