What is a Post-Dated Cheque – Validity, Legal Implications and Working
30 December 2022
When we were young, we witnessed our parents writing cheques with a future date written on it. These cheques were mostly used for future payments that were yet to be made but should be made. Such cheques with a future deposit or encashment date are known as post-dated cheques.
Though most consumers have shifted to using the auto-debit feature in net banking to make future payments like loan EMIs, it’s still worthwhile to know the importance and purpose of post-dated cheques. Let’s dive in!
What is a Post-Dated Cheque?
A post-dated cheque is a regular cheque where the writer specifies a future date on the cheque. They do that to ensure the payment is made to the payee on or after the stipulated date. This date can be any future date, depending on the needs of the individual or the company.
However, like any other normal cheques, a post-dated cheque comes with a validity period of three months from the date of issuance.
How Does a Post-Dated Check Work?
People write these cheques when they want a gap between the date of writing the cheque and when the amount is withdrawn or deposited. The primary reasons for writing a post-dated cheque include:
If the cheque writer does not have sufficient funds in their bank account, currently, they are expecting their balance to increase within a stipulated time frame.
If the cheque writer is paying for something in advance, like before the due date or the completion of the service.
Writing a post-dated cheque is legal in India. However, these cheques become illegal when you are sure there are no funds to pay for the cheque.
You can also use a post-dated cheque to defer payments if you don’t intend to pay for something immediately. You must ensure you arrange the required funds before the post-dated cheque validity expires.
How to Write a Post-Dated Cheque?
The working of a post-dated cheque is quite simple. Like any other regular cheque, fill out the required. However, instead of adding the current date in the date section, add the date when you want the cheque to be deposited or cashed.
The date you add to the cheque acts as a timer for the payee. Based on the date mentioned in the cheque, the payee decides when to get it encashed.
Validity of a Post-Dated Cheque
As the post-dated cheque rules, the validity of a post-dated check in India is three months. But there’s a little technicality attached to it. The three months are not counted in the number of days, but the date of issuance. For example, if the cheque was issued or is payable on 01 Jan 2021, the cheque will be valid till 31st of Mar 2021, irrespective of the number of days in between.
Legal Implications of a Post-Dated Cheque
All cheques, including the post-dated cheques, fall under the purview of Section 138 of the Negotiable Instruments Act. According to the section, all post-dated cheques must have a future date and the amount. If any disputes arise due to a post-dated cheque, the court will reject a post-dated cheque not duly filled by the issuer.
In the case of a post-dated cheque, if the cheque bounces or is dishonoured, it is considered to be a punishable offence. You can get a jail term or a heavy penalty depending on the clauses of section 138.
Penalty for Dishonouring a Post-dated Cheque
The Negotiable Instruments Act states the penalties for dishonouring a post-dated cheque. Several legal penalties are in place to ensure that any individual or group does not misuse the post-dated cheques. The legal penalties for dishonouring a post-dated cheque include:
Imprisonment for at least 1 year
A fine equal to or double the amount stated on the cheque in question
Even the penalties can be applied together depending on the cause of dishonouring.
If the check bounces or is dishonoured, a legal notice is sent to the issuer in the next 30 days. If the issuer takes no corrective actions, the concerned holder is free to file a case against the issuer.
What are the Alternatives to a Post-dated Cheque?
While a post-dated cheque has several advantages, it also has its disadvantages. Cheques are prone to wear and tear. Also, there are chances of a cheque being misplaced. Additionally, writing multiple cheques for multiple payments can be extremely time consuming.
You can try out some of the ways listed below as alternatives to writing a post-dated cheque:
Use the online payment service via net banking to schedule a payment for a future date.
You can register for automatic electronic payments if you make regular payments to an individual or a company.
You can also give a standing instruction to the bank to make payment to any account at your desired date. Using these ways, you can avoid all kinds of extra fees and penalties that come with a post-dated cheque.
Tips to Keep in Mind while Receiving a Post-dated Check
It would be best if you managed a post-dated cheque well. You can consider a few tips while dealing with a post-dated cheque. Some of these tips are:
It would help if you keep a tab on the number of post-dated cheques you would receive.
If you accept the cheques on behalf of the company, you must ensure that they get special accounting treatment and that the transactions are recorded in the accounts books.
Ensure that you get the posted date cheque encashed on or after the date mentioned on the cheque. Avoid getting the cheque encashed before the due date to avoid legal formalities.
You must also consider all the post-dated cheque rules before you receive a post-dated check from any of your parties.
If you make use of these tips, you can get your payments on time through the
post-dated cheques without any hassle.
There are several benefits to writing a post-dated cheque. However, it is the traditional way of making payments, and you can opt-in for newer and more advanced methods of future payments like online transfers, automatic fund transfers, etc.
Q1. Are post-dated cheques legal?
Ans. Yes, writing a post-dated cheque is legal in India. However, if the cheque bounces or is dishonoured, it becomes illegal.
Q2. Can an individual encash a post-dated cheque before its due date?
Ans. It depends on the policy of the bank. As soon as you sign the cheque, it becomes legal tender. You must confirm with your bank about the encashment policies of the post-dated cheque.
Q3. What are the penalties if a post-dated cheque is dishonoured?
Ans. If a post-dated cheque is dishonoured, the issuer might get an imprisonment sentence for up to a year.
Q4. Do banks ask for post-dated cheques?
Ans. If you have taken a short-term loan from the bank, they might want to guarantee their future payments, so they might ask for post-dated cheques.
Q5. For how many months is a post-dated cheque valid?
Ans. A post-dated cheque is valid for three months from the date of its issuance.
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