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BATAS PAMBANSA BLG.

22: ANNOTATED
This is an annotation of Batas Pambansa Blg. ("BP")
22 -- "An
Act Penalizing the Making or Drawing and Issuance of a
Check
Without Sufficient Funds or Credit and for Other
Purposes"
(See also: Full text of BP 22; Forum Discussion).
BP 22, often referred to as the "Bouncing Checks
Law,"
governs the criminal liability arising from the issuance
of
bounced checks. What the law punishes is the
issuance of
a bouncing check and not the purpose for which the
check
was issued, nor the terms and conditions of its
issuance. To
determine the reasons for which checks are issued, or
the terms
and conditions for their issuance, will greatly erode the
faith
the public reposes in the stability and commercial
value
of checks as currency substitutes, and bring about
havoc in
trade and in banking communities. (Caras vs. Court of
Appeals,
G.R. No. 129900, 2 October 2001)

Section 1. Checks without sufficient funds. - Any person who makes o


issues any check to apply on account or for value, knowing at the tim
he does not have sufficient funds in or credit with the drawee bank fo
of such check in full upon its presentment, which check is subsequen
by the drawee bank for insufficiency of funds or credit or would have
dishonored for the same reason had not the drawer, without any valid
ordered the bank to stop payment, shall be punished by imprisonmen
than thirty days but not more than one (1) year or by a fine of not les
more than double the amount of the check which fine shall in no case
Hundred Thousand Pesos, or both such fine and imprisonment at the
the court.

The same penalty shall be imposed upon any person who, having suffi
or credit with the drawee bank when he makes or draws and issues a
fail to keep sufficient funds or to maintain a credit to cover the full am
check if presented within a period of ninety (90) days from the date a
thereon, for which reason it is dishonored by the drawee bank.

Where the check is drawn by a corporation, company or entity, the p


persons who actually signed the check in behalf of such drawer shall
this Act.
Annotation:
Section 1 of the Bouncing Checks Law penalizes two
distinct
acts (Bautista vs. Court of Appeals, G.R. No. 143375,
6 July 2001):
(1) Making or drawing and issuing any check to apply
on account or for value, knowing at the time of issue
that the drawer does not have sufficient funds in or

credit with the drawee bank.


(2) Having sufficient funds in or credit with the
drawee bank shall fail to keep sufficient funds or to
maintain a credit to cover the full amount of the
check if presented within a period of 90 days from
the date appearing thereon, for which reason it is
dishonored by the drawee bank.
In the first paragraph, the drawer knows that he does
not have
sufficient funds to cover the check at the time of its
issuance,
while in the second paragraph, the drawer has
sufficient funds
at the time of issuance but fails to keep sufficient
funds or
maintain credit within ninety (90) days from the date
appearing
on the check. In both instances, the offense is
consummated
by the dishonor of the check for insufficiency of funds
or credit.
The check involved in the first offense is worthless at
the time
of issuance since the drawer had neither sufficient
funds in
nor credit with the drawee bank at the time, while that
involved in the second offense is good when issued as
drawer
had sufficient funds in or credit with the drawee bank

when
issued. Under the first offense, the 90-day
presentment
period is not expressly provided, while such period is
an express
element of the second offense.
Elements: General
The elements of the offense under Section 1 of B.P.
Blg. 22 are:
(1) drawing and issuance of any check to apply on
account or for value;
(2) knowledge by the maker, drawer, or issuer that
at the time of issue he did not have sufficient
funds in or credit with the drawee bank for the
payment of such check in full upon presentment;
and
(3) said check is subsequently dishonored by the
drawee bank for insufficiency of funds or credit,
or would have been dishonored for the same
reason had not the drawer, without any valid reason,
ordered the bank to stop payment.
(Caras vs. Court of Appeals, supra.)
The second requisite or element is discussed in Section
2 below,
while the third requisite is discused in Section 3.
Applicable penalties

In A.M. No. 00-11-01-SC (2001), the Supreme Court


clarified
that the earlier circular, Administrative Circular 122000, did not
remove imprisonment as an alternative penalty for
violations
of B.P. Blg. 22. The Judges may, "in the exercise of
sound
discretion, and taking into consideration the peculiar
circumstances of each case, determine whether the
imposition of a fine alone would best serve the
interests of
justice or whether forbearing to impose imprisonment
would
depreciate the seriousness of the offense, work
violence
on the social order, or otherwise be contrary to the
imperatives of justice." Also, "[s]hould only a fine be
imposed
and the accused be unable to pay the fine, there is no
legal
obstacle to the application of the Revised Penal Code
provisions on subsidiary imprisonment."

notice that such check has not been paid by the drawee.
Annotation:
The second element of the offense is the knowledge of
the
accused about the insufficiency of funds. It must be
shown
beyond reasonable doubt that the accused knew of the
insufficiency of funds at the time the check was issued.
Section 2 provides that the accused must be notified
of the
dishonor.

The prosecution must establish that the accused was


actually
notified that the check was dishonored, and that he or
she
failed, within five banking days from receipt of the
notice, to
pay the holder of the check the amount due thereon or
to make
arrangement for its payment. The notice of dishonor of
a check
to the maker must be in writing. A mere oral notice to
SEC. 2. Evidence of knowledge of insufficient funds. The making, drawing and
the
issuance of a check payment of which is refused by the drawee bank because of
drawer or maker of the dishonor of his check is not
insufficient funds in or credit with such bank, when presented within ninety (90)
enough.
days from the date of the check, shall be prima facie evidence of knowledge of
It's true that Section 2 does not state that the notice
such insufficiency of funds or credit, unless such maker or drawer pays the
of
holder thereof the amount due thereon, or makes arrangements for payment in
dishonor be in writing. This, however, should be taken
full by the drawee of such check within five (5) banking days after receiving
in

conjunction with Section 3, which provides that where


there
are no sufficient funds in or credit with such drawee
bank,
such fact shall always be explicitly stated in the notice
of
dishonor or refusal.This is consistent with the rule
that penal
statutes have to be construed strictly against the State
and
liberally in favor of the accused. Without a written
notice of
dishonor of the checks, there is no way of determining
when the 5-day period prescribed in Section 2 would
start
and end. (Bax vs. People, G.R. No. 149858, 5
September 2007,
citing Rico vs. People, G.R. No. 137191, 18 November
2002,
392 SCRA 61)
In other words, the prima facie presumption arises
when a
check is issued. But the law also provides that the
presumption
does not arise when the issuer pays the amount of the
check
or makes arrangement for its payment "within five
banking days
after receiving notice that such check has not been
paid by

the drawee." Verily, BP 22 gives the accused an


opportunity to
satisfy the amount indicated in the check and thus
avert
prosecution.(King vs. People, G.R. No. 131540, 2
December 1999)
The foregoing discussion abundantly shows that the
notice
must be in writing. A verbal and indirect notice,
however,
was found to be sufficient in the case of Yulo vs.
People,
G.R. No. 142762, 4 March 2005. The pertinent finding
of fact
in this case is as follows:
As Myrna [the complainant] did not know
petitioners [the accused] address, she immediately
informed Josefina [the "best friend of the accused]
about the dishonored checks. The latter told Myrna
not to worry and repeated her assurance that
petitioner is her best friend and a good payer.
Myrna tried to get petitioners address from Josefina,
but the latter refused and instead made the
assurance that she will inform petitioner that the
checks were dishonored.
It is clear from these findings that there was no
written notice given to the accused. It is also clear
that no notice, even a verbal notice, was given
directly to the accused. Still, the Supreme Court

concluded that:
We likewise find no reason to sustain petitioners
contention that she was not given any notice of
dishonor. Myrna had no reason to be suspicious
of petitioner. It will be recalled that Josefina
Dimalanta assured Myrna that petitioner is her
"best friend" and "a good payer." Consequently,
when the checks bounced, Myrna would naturally
turn to Josefina for help. We note that Josefina
refused to give Myrna petitioners address but
promised to inform petitioner about the dishonored
checks.

to cause to be written, printed, or stamped in plain language thereon


thereto, the reason for drawee's dishonor or refusal to pay the same:
That where there are no sufficient funds in or credit with such drawee
fact shall always be explicitly stated in the notice of dishonor or refus

In all prosecutions under this Act, the introduction in evidence of any


dishonored check, having the drawee's refusal to pay stamped or wri
or attached thereto, with the reason therefor as aforesaid, shall be pr

Not with standing receipt of an order to stop payment, the drawee sh


the notice that there were no sufficient funds in or credit with such ba
payment in full of such check, if such be the fact.
Annotation:

This ruling would appear to be inconsistent with


the required burden of proof and the rule of
interpretation of penal laws, succinctly noted in
King vs. People, thus:

The third element of the offense is the dishonor of the


check.
Under Section 3, "the introduction in evidence of any
unpaid and
We must stress that BP 22, like all penal
dishonored check, having the drawees refusal to pay
statutes, is construed strictly against
stamped or
the State and liberally in favor of the
written thereon, or attached thereto, with the reason
accused. Likewise, the prosecution has
therefor
the burden to prove beyond reasonable
as aforesaid, shall be prima facie evidence of the
doubt each element of the crime. Hence,
making or
the prosecutions case must rise or
issuance of said check, and the due presentment to
fall on the strength of its own
the drawee
evidence, never on the weakness or
for payment and the dishonor thereof, and that the
even absence of that of the defense.
same was
properly dishonored for the reason written, stamped,
Section 3. Duty of drawee; rules of evidence. - It shall be the duty
or of the drawee of
any check, when refusing to pay the same to the holder thereof
upon presentment,
attached
by the drawee on such dishonored check."

For
instance, in the case of King vs. People (supra), the
prosecution
presented the checks which were stamped with the
words
ACCOUNT CLOSED, supported by the returned check
tickets
issued by the depository bank stating that the checks
had been
dishonored. The documents constitute prima facie
evidence that
the drawee bank dishonored the checks, and no no
evidence was
presented to rebut the claim.

unconstitutional, the remaining provisions shall continue to be in forc


Annotation:

The attacks on the constitutionality of BP 22, as


discussed in
Lozano vs. Martinez (G.R. No. L-63419, 18 December
1986),
are the following: (1) it offends the constitutional
provision
forbidding imprisonment for debt; (2) it impairs
freedom of
contract; (3) it contravenes the equal protection
clause;
(4) it unduly delegates legislative and executive
Section 4. Credit construed. - The word "credit" as used hereinpowers;
shall be construed
and
(5) its enactment
to mean an arrangement or understanding with the bank for the payment
of such is flawed in that during its
passage
check.
the Interim Batasan violated the constitutional
Section 5. Liability under the Revised Penal Code. - Prosecutionprovision
under this Act shall
be without prejudice to any liability for violation of any provision
of the amendments to a bill on Third Reading.
prohibiting
Penal Code.
Unless
otherwise indicated, the succeeding discussions are
Annotation:
lifted
from Lozano.
The act of issuing a bouncing check could give rise to
separate
offenses punishable under BP 22 and simultaneously
under the
Revised Penal Code.

Non-imprisonment for debt

It had been argued that BP 22 runs counter to the


inhibition
in the
of Rights which states, "No person shall be
Section 6. Separability clause. - If any separable provision of this
Act Bill
be declared
imprisoned for debt or non-payment of a poll tax."

Since the
offense under BP 22 is consummated only upon the
dishonor
or non-payment of the check when it is presented to
the
drawee bank, the statute is really a "bad debt law"
rather than
a "bad check law." What it punishes is the nonpayment of
the check, not the act of issuing it. The statute, it is
claimed, is nothing more than a veiled device to
coerce
payment of a debt under the threat of penal sanction.
The gravamen of the offense punished by BP 22 is the
act of making and issuing a worthless check or a check
that
is dishonored upon its presentation for payment. It is
not the
non-payment of an obligation which the law punishes.
The law
is not intended or designed to coerce a debtor to pay
his debt.
The thrust of the law is to prohibit, under pain of penal
sanctions, the making of worthless checks and putting
them in
circulation. Because of its deleterious effects on the
public
interest, the practice is proscribed by the law. The law
punishes the act not as an offense against property,
but

an offense against public order.


It may be constitutionally impermissible for the
legislature to
penalize a person for non-payment of a debt ex
contractu.
But certainly it is within the prerogative of the
lawmaking
body to proscribe certain acts deemed pernicious and
inimical
to public welfare. Acts mala in se are not the only acts
which
the law can punish. An act may not be considered by
society as inherently wrong, hence, not malum in se
but
because of the harm that it inflicts on the community,
it can
be outlawed and criminally punished as malum
prohibitum.
The state can do this in the exercise of its police
power.
The enactment of BP 22 is a declaration by the
legislature
that, as a matter of public policy, the making and
issuance
of a worthless check is deemed public nuisance to be
abated
by the imposition of penal sanctions. It had been
reported that
the approximate value of bouncing checks per day was

close
to 200 million pesos.
It is not for the court to question the wisdom or policy
of
the statute. It is sufficient that a reasonable nexus
exists
between means and end. Considering the factual and
legal
antecedents that led to the adoption of the statute, it
is not
difficult to understand the public concern which
prompted
its enactment.
Impairment of freedom of contract
Article III, Section 10 of the Constitution provides that:
"No law impairing the obligation of contracts shall be
passed.
" However, the freedom of contract which is
constitutionally
protected is freedom to enter into "lawful" contracts.
Contracts
which contravene public policy are not lawful. Checks
can not
be categorized as mere contracts. It is a commercial
instrument
which, in this modem day and age, has become a
convenient
substitute for money; it forms part of the banking

system and
therefore not entirely free from the regulatory power of
the state.
Equal protection of the laws
The challenge is to the effect that BP 22 is
discriminatory or is
violative of the equal protection of the laws since it
penalizes
the drawer of the check, but not the payee. It had
been argued
that the payee is just as responsible for the crime as
the drawer
of the check, since without the indispensable
participation
of the payee by his acceptance of the check there
would be no
crime. It is settled, however, that the clause "equal
protection
of the laws" does not preclude classification of
individuals, who
may be accorded different treatment under the law as
long as
the classification is no unreasonable or arbitrary. The
argument
premised on the equal protection of the law is
tantamount to
saying that, to give equal protection, the law should
punish both
the swindler and the swindled.

Improper delegation of legislative powers


It had been argued that the law violates the
Constitutional
prohibition against the delegation of legislative power,
on the
theory that the offense is not completed by the sole
act of the
maker or drawer but is made to depend on the will of
the
payee -- if the payee does not present the check to the
bank
for payment but instead keeps it, there would be no
crime.
This argument, however, stretches to absurdity the
meaning of
"delegation of legislative power." What cannot be
delegated is
the power to legislate, or the power to make laws.
which means,
as applied to the present case, the power to define the
offense
sought to be punished and to prescribe the penalty.
By
no stretch of logic or imagination can it be said that
the power to
define the crime and prescribe the penalty therefor
has been in
any manner delegated to the payee. Neither is there
any provision
in the statute that can be construed, no matter how

remotely,
as undue delegation of executive power.
Defect in the enactment of BP 22
It is argued that Section 9 (2) of Article VII of the
1973 Constitution was violated by the legislative body
when it
enacted BP 22 into law. This constitutional provision
prohibits
the introduction of amendments to a bill during the
Third
Reading. It is claimed that during its Third Reading, the
bill
which eventually became BP 22 was amended in that
the text
of the second paragraph of Section 1 of the bill as
adopted
on Second Reading was altered or changed in the
printed text
of the bill submitted for approval on Third Reading.
However,
it is clear from the records that the text of the second
paragraph of Section 1 of BP 22 is the text which was
actually
approved by the body on Second Reading.
Section 7. Effectivity. - This Act shall take effect fifteen
days
after publication in the Official Gazette. evidence of
the making

or issuance of said check, and the due presentment to


the
drawee for payment and the dishonor thereof, and that
the
same was properly dishonored for the reason written,
stamped
or attached by the drawee on such dishonored check.
http://jlp-law.com/jurisprudence

Bouncing Check & BP 22


A common predicament faced by businessmen is
violating the Batas Pambansa Blg. 22 also known as
the Bouncing Checks Law. Evidently, businessmen
issue checks as a matter of practice, and sometimes
when the due dates of these checks fall, either by
inadvertence or unavailable finances, the check
bounces.
BP 22 punishes a person for issuing a worthless
check. A check is obviously worthless when, at the
time it is encashed for payment, which must be
within ninety days from issuance, it is dishonored by
the issuing bank because of insufficient funds, or
even when the account against which the check was
drawn was already closed. In any of these cases, the
issuer of the check commits a violation of BP 22, and
may be held liable for imprisonment of thirty days to
one year or a fine a double the value of the check or

both at the discretion of the court. Moreover, the


issuer of the check may also be liable for
imprisonment, even if only a fine is imposed by the
court, if the issuer has no sufficient property to pay
the fine imposed, in which case he or she shall be
liable to serve a prison term at the rate of one day for
each eight pesos of the unpaid fine.
Another manner in which a person becomes liable
under BP 22 is when the issuer orders his or her
bank to make a stop payment of the check without
any valid reason and the check would have been
dishonored for insufficiency of funds had it not been
for the stop payment order given by the issuer.
It must also be remembered that prosecution under
BP 22 is not a bar for prosecution for Estafa, and the
issuer of the check may be held liable for one or both
crimes, singly or simultaneously when the complaints
are filed in separate courts.
But the issuer of the check is not left with remedies.
Our Supreme Court has sanctioned numerous
defenses which have acquitted individuals charged
with a violation of BP 22. Possible defenses in an
indictment include 1) payment of the value of the
dishonored check within five banking days from
receipt of the notice of dishonor; 2) payment of the
value of the check before filing of the criminal case in
court; 3) failure to serve a written notice of dishonor
of the check to the issuer; 4) novation or change in

the underlying obligation of the parties before the


filing of the criminal case in court; 5) a stop payment
order pursuant to a valid reason such as nondelivery of goods or services; and 6) knowledge by
the payee that the check was not supported by
sufficient funds when the issuer issued the check.

as she did not agree to any settlement

A violation of BP 22 is not really a wrong in itself or


involves wrongful or immoral conduct. Since
committing a violation of BP 22 is not an inherently
wrong act, the Supreme Court has, in numerous
cases, merely imposed a penalty of fine,
understanding the nature of the offense and the
problems that every businessman encounters

letter asking me to pay all my debts otherwise

Dear PAO,
I received a demand letter from my creditor to
pay the amount corresponding to the
postdated checks I issued, which were
dishonored because of insufficient funds.
Before receipt of the demand letter, I was
willing to settle my obligations but my creditor
and I had a misunderstanding regarding the
manner of payment of my debt. In the end,
she said that she would just see me in court

anymore.
I admit to be a bit angry because of her
inconsideration. Then, I received a demand
she will file a case for estafa and threatens
me of imprisonment for 20 years. I believe
that the case will be dismissed because I
know that no person can be imprisoned for
non-payment of debt. Please clarify!
Josie
Dear Josie,
Our Constitution has declared under Section
20, Article III thereof that no person shall be
imprisoned for debt or non-payment of poll
tax. Although a person who is indebted
cannot be punished by imprisonment, he may
nevertheless be sued civilly for collection of
sum of money, wherein the court shall order

payment of debt. However, when the act of

On the other hand, the maker or issuer may

borrowing of money is accompanied with an

likewise be liable for estafa punishable under

act which is punishable by law with

Article 315 of the Revised Penal Code if he

imprisonment or penalty, the debtor may be

issues a check for payment of an obligation

criminally liable not for the non-payment of

using false pretense or fraudulent act.

debt but for the commission of the crime. As

Thus, your creditor may pursue either a

in your case, borrowing, alone, of money will

criminal case for violation of B.P. 22 and/or

not make you criminally liable. But your

estafa against you depending on the events

issuance of postdated checks which were

surrounding your issuance of postdated

later dishonored for insufficiency of funds

checks. The penalty of twenty (20) years for

constitutes a crime of either violation of Batas

the issuance of unfunded check is not a

Pambansa Blg. 22 (B.P. 22) or Estafa.

threat for you to pay in full the amount of the

BP 22, commonly referred to as Bouncing

checks. The said imprisonment is the

Checks Law, punishes any person who

maximum penalty which can be imposed

makes or draws and issues any checks to

upon an accused in an estafa case under

apply on account or for value, knowing at the

Article 315 of the Revised Penal Code, which

time of issue that he does not have sufficient

states that the penalty of prision correccional

funds in or credit with the drawee bank for the

in its maximum period to prision mayor in its

payment of such check upon its presentment.

minimum period, if the amount of the fraud is

over 12,000 pesos but does not exceed


22,000 pesos, and if such amount exceeds
the latter sum, the penalty provided in this
paragraph shall be imposed in its maximum
period, adding one year for each additional
10,000 pesos; but the total penalty which may
be imposed shall not exceed twenty years.
Please be reminded that the above legal
opinion is solely based on our appreciation of
the problem that you have stated. The opinion
may vary when other facts are stated.
http://www.manilatimes.net/bounced-checksconstitute-crime-of-estafa/54865/

No Imprisonment in BP 22 or
Bouncing Checks Cases in
Philippine Law?
in Advice, Finance & Accounting, Money & Success January 31, 2013 Comments
Off 12503 Views

by Errol Gatdula |
Recently, questions on BP 22 have been asked us such that
we needed to re-issue this 3-year old article from Pinoy
Business:
We previously noted that even if an accused is found guilty
in violating Batas Pambansa (BP) Blg. 22 or theAntiBouncing Checks law, its possible that no imprisonment will
be imposed. The Supreme Court had long issued
a Circular containing its policy on the matter of the
imposition of penalties.
BP 22 imposes the penalty of imprisonment of not less than
30 days but not more than 1 year OR a fine of not less than
but not more than double the amount of the check, which
fine shall in no case exceed P200,000, OR both such fine
and imprisonment at the discretion of the court. In the case
of Eduardo Vaca vs. Court of Appeals, the Supreme Court
modified the sentence imposed by deleting the penalty of
imprisonment and imposing only the penalty of fine in an
amount double the amount of the check. In justification
thereof, the Court said:
BP 22 imposes the penalty of imprisonment of not less than
30 days but not more than 1 year OR a fine of not less than
but not more than double the amount of the check, which
fine shall in no case exceed P200,000, OR both such fine
and imprisonment at the discretion of the court. In the case
of Eduardo Vaca vs. Court of Appeals, the Supreme Court
modified the sentence imposed by deleting the penalty of
imprisonment and imposing only the penalty of fine in an
amount double the amount of the check. In justification
thereof, the Court said:
Petitioner are first-time offenders. They are Filipino
entrepreneurs who presumably contribute to the national
economy. Apparently, they brought this appeal, believing in
all good faith, although mistakenly that they had not
committed a violation of B.P. Blg. 22. Other wise they could
simply have accepted the judgment of the trial court and
applied for probation to evade a prison term. It would best
serve the ends of criminal justice if in fixing the penalty
within the range of discretion allowed by 1, par. 1, the
same philosophy underlying the Indeterminate Sentence

Law is observe, namely, that of redeeming valuable human


material and preventing unnecessary deprivation f personal
liberty and economic usefulness with due regard to the
protection f the social order. In this case we believe that a
fine in an amount equal to double the amount of the check
involved is an appropriate penalty to impose on each of the
petitioners.
In the subsequent case of Rosa Lim vs. People of the
Philippines, the Supreme Court also deleted the penalty of
imprisonment and sentenced the drawer of the bounced
check to the maximum of the fine allowed by B.P. Blg. 22,
i.e., P200,000, and concluded that such would best serve
the ends of criminal justice.
Due to the confusion caused by the circular, the Supreme
Court issued another circular (A.M. No. 00-11-01SC) clarifying that the clear tenor and intention
of Administrative Circular No. 12-2000 is not to remove
imprisonment as an alternative penalty, but to lay down a
rule of preference in the application of the penalties
provided for in B.P. Blg. 22. To summarize:
1. Administrative Circular 12-2000 does not remove
imprisonment as an alternative penalty for violations ofB.P.
Blg. 22;
2. The Judges concerned may, in the exercise of sound
discretion, and taking into consideration the peculiar
circumstances of each case, determine whether the
imposition of a fine alone would best serve the interests of
justice or whether forbearing to impose imprisonment would
depreciate the seriousness of the offense, work violence on
the social order, or otherwise be contrary to the imperatives
of justice;
3. Should only a fine be imposed and the accused be unable
to pay the fine, there is no legal obstacle to the application
of the Revised Penal Code provisions on subsidiary
imprisonment.
In other words, the circular establishes a rule of preference
in the application of the penal provisions of B.P. 22, such
that where the circumstances of both the offense and the
offender clearly indicate good faith or a clear mistake of fact
without taint of negligence, the imposition of a fine along

should be considered as the more appropriate penalty.


[Read Primer on Bouncing Checks Law]

What if a cheque bounces? Here's a


guide to the legal recourse
available to you
Bounced cheques are one of the most
common offencesplaguing the financial world.
According to the Supreme Court, there are over
40 lakh such pending cases in the country.
A cheque can be dishonoured for various
reasons, the most common being insufficient
funds in the account of the person drawing
the cheque, and a mismatch of signatures with
the bank records. But what do you do if you land
a bad cheque? Here's a step-by-step guide to
the legal recourse that is available to you.
Filing a criminal complaint
When a cheque bounces the first time, the bank
issues a 'cheque return memo', stating the
reasons for non-payment. The holder can
resubmit the cheque to the bank within three

months of the date on it, if he believes it will be


honoured the second time.
The other option would be to prosecute the
defaulter legally. The first step is to send a legal
notice to the defaulter within 30 days of receiving
the cheque return memo. All the relevant facts of
the case, including the nature of transaction,
amount, date of depositing the instrument in the
bank, and subsequent date of dishonouring,
should be clearly mentioned in the notice. If the
cheque issuer fails to make a fresh payment
within 30 days of receiving the notice, the payee
has the right to file a criminal complaint under
Section 138 of the Negotiable Instruments Act.
However, the complaint should be registered in a
magistrate's court within a month of the expiry of
the notice period.
If you fail to file the complaint within this period,
your suit will become time-barred and, hence, not
be entertained by the court unless you show
sufficient and reasonable cause for the delay. On
receiving the complaint, along with an affidavit

and relevant paper trail, the court will issue


summons and hear the matter. If found guilty, the
defaulter can be punished with a prison term of
two years and/or a fine, which can be as high as
twice the cheque amount.
However, the defaulter can appeal to the
sessions court within one month of the date of
judgement of the lower court. If a prolonged court
battle is not acceptable to both the parties, an
out-of-court settlement can be attempted at any
point. "You can also file a case of cheating under
Section 420 of the Indian Penal Code, but the
above recourse is preferred as it is faster and
specially dedicated to this particular offence
(bounced cheques)," says Ravi Goenka,
advocate, Goenka Law Associates.
Filing a civil suit
While the above-mentioned process is helpful in
taking a defaulter to task, it may not always result
in recovery of the pending dues. Hence, one can
file a separate civil suit for recovery of the

cheque amount, along with the cost borne and


the lost interest.
Exceptions
These legal remedies are available only where
pending debt or liability can be clearly
established. Hence, if a bounced cheque was
issued as a donation or as a gift, the holder
cannot legally sue the defaulter.
Risk faced by defaulters
A jail term or heavy penalty isn't the only
consequence faced by the issuer of a
dishonoured cheque. The bank has the right to
stop the chequebook facility and close the
account for repeat offences of bounced cheques.
However, the RBI clearly states that such action
can be taken only if the default has taken place
at least four times on cheques valued at over Rs
1 crore. Says Aakanksha Joshi, senior associate,
Economic Laws Practice: "If the bounced cheque
was for repayment of loans, banks also have the
collateral offered as security. They are bound to
issue a notice before they auction such property

to recover the money." According to her, a bank


can also deduct money from the defaulter's
account if there is an explicit contract giving the
bank such a right.
y Kelvin Lee
Question of Law
Wednesday, May 15, 2013

CHECKS are issued all the time in todays business


world. No business operates without the use of checks.

Because of the prevalence in the use of checks in the


business world, it is to be expected that some, if not
many, would bounce.

Thus the legislature created one of the most


commonly used laws in the country, Batas Pambansa
Bldg. 22 (BP 22) or the Anti-Bouncing Checks Law.

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Section 1 of BP 22 explains the main thrust of the law.


It provides that: Any person who makes or draws and
issues any check to apply on account or for value,
knowing at the time of issue that he does not have
sufficient funds in or credit with the drawee bank for
the payment of such check in full upon its
presentment, which check is subsequently dishonored
by the drawee bank for insufficiency of funds or credit
or would have been dishonored for the same reason
had not the drawer, without any valid reason, ordered
the bank to stop payment, shall be punished by
imprisonment

To explain, this law imposes criminal liability on the


issuance of bouncing checks. In the words of the
Supreme Court: What the law punishes is the
issuance of a bouncing check and not the purpose for
which the check was issued, nor the terms and
conditions of its issuance. (Caras vs. Court of Appeals,
G.R. No. 129900, 2 October 2001).
One must take note though that the gravamen of the
offense is the issuance of the bouncing check, and not
the non-payment of a debt by the one who issued the
check. As explained by the Supreme Court:
The gravamen of the offense punished by B.P. 22 is
the act of making and issuing a worthless check or a
check that is dishonored upon its presentation for

payment. It is not the non-payment of an obligation


which the law punishes. The law is not intended or
designed to coerce a debtor to pay his debt. The thrust
of the law is to prohibit, under pain of penal sanctions,
the making of worthless checks and putting them in
circulation. Because of its deleterious effects on the
public interest, the practice is proscribed by law.
The law punishes the act not as an offense against
property, but an offense against public order. (Medalla
v. Laxa, G.R. No. 193362, 18 January 2012).
The point then of punishing the issuance of bouncing
checks is to safeguard the financial system. If
bouncing checks were allowed to happen without
penal sanction, it is possible that this would greatly
erode the faith the public reposes in the stability and
commercial value of checks as currency substitutes,
and bring about havoc in trade and in banking
communities. (Caras, supra).

Thus, when you do business, you have to be very


careful when you issue a check. If it bounces, and
subject to the proper elements and notices, you could
already be brought to the Office of the Prosecutor for
criminal charges.

We shall discuss more on the bouncing checks law,


such as its elements for the commission of this crime,

in a future column. Until then, make sure your checks


dont bounce!

ordered the bank to stop payment. (Caras vs. Court of


Appeals, G.R. No. 129900, 2 October 2001)

By Kelvin Lee

Wednesday, May 22, 2013

Thus, one has to prove three things for a violation of


B.P. 22. First, one has to show and prove that there
was the drawing and issuance of a check to apply on
account or for value.

LAST week we discussed the Anti-Bouncing Checks


Law (Batas Pambansa Bilang 22), as well as its main
thrust and how it imposes criminal liability on the
issuance of a bouncing check.

Second, that the one who issued, made or drew the


check knew at the time of issue that there was
insufficient funds in the bank for the payment of the
check upon its presentment.

This week, let us discuss, briefly, the elements of a


violation of Sec. 1 of B.P. 22.

Third, that the check is subsequently dishonored by


the bank for insufficiency of funds, or would have been
dishonored if the bank was subjected to a stop
payment order of the check by its drawer, maker, or
issuer.

Question of Law

The Supreme Court has held that the following are the
elements for a bouncing check violation under B.P. 22:
The elements of the offense under Section 1 of B.P.
Blg. 22 are:
(1) drawing and issuance of any check to apply on
account or for value;
(2) knowledge by the maker, drawer, or issuer that at
the time of issue he did not have sufficient funds in or
credit with the drawee bank for the payment of such
check in full upon presentment; and
(3) said check is subsequently dishonored by the
drawee bank for insufficiency of funds or credit, or
would have been dishonored for the same reason had
not the drawer, without any valid reason,

The first and last elements are easy to prove because


the mere existence of a bounced check is sufficient
evidence. It is the second element where most cases
on B.P. 22 hinge on, as it is difficult to prove that the
one who issued the bouncing check knew there were
insufficient funds in the bank for payment.
As such, Section 2 of B.P. 22 provides as follows:

SEC. 2. Evidence of knowledge of insufficient funds -The making, drawing and issuance of a check payment
of which is refused by the drawee bank because of
insufficient funds in or credit with such bank, when

presented within ninety (90) days from the date of the


check, shall be prima facie evidence of knowledge of
such insufficiency of funds or credit, unless such maker
or drawer pays the holder thereof the amount due
thereon, or makes arrangements for payment in full by
the drawee of such check within five (5) banking days
after receiving notice that such check has not been
paid by the drawee. (Underscoring supplied).
Under Section 2, it is presumed that a check which is
refused payment by the bank is evidence of knowledge
of insufficiency of funds or credit. However, it is
required that there is a notice of dishonor made upon
the one who issued the check. In other words, Section
2 provides that there must be written notification of
the dishonor made to the issuer of the check. The
notice of dishonor should then inform the issuer that
he has five days to make good the amount of the
check.
It must be noted that the notice of dishonor of a
check to the maker must be in writing. A mere oral
notice to the drawer or maker of the dishonor of his
check is not enough. (Bax vs. People, G.R. No.
149858, 5 September 2007). From that then, one can
determine the existence of the 2nd element of a B.P.
22 violation.
Thus, once all the elements of B.P. 22 or bouncing
checks are present, such as those explained above,
the issuer of the check can now be prosecuted under

the Anti-Bouncing Checks Law before the Office of the


Prosecutor.
Once again, the reminder is clear: be careful when you
issue your checks. Make sure your checking account
has enough money to cover the amounts of the
checks. Otherwise, you may find yourself facing a
bouncing checks case.