Legal Alert – Dishonoured Cheques Law in Nigeria
In this Issue:-
- Business Quote of the Month.
- Legal News for the Month.
- Legal Alert for February 2007 – Dishonoured Cheques Law in Nigeria.
- Subscribe & Unsubscribe.
- Disclaimer Notice.
Business Quote of the Month
Wisdom comes not by knowledge but by knowledge with understanding.
Legal News for the Month
The National Film and Video Censor’s Board (NFVCB) is soon to commence the implementation of a “Comprehensive Policy on Distribution, Exhibition and Marketing of Films, Movies and other Motion Pictures in Nigeria”. This Policy would enable for the existence of “… an effective distribution framework for Movies”. For further information on this and other activities of the NFVC Board you can visit NFVCB web site www.nfvcb.gov.ng.
The upper House of Legislators in Nigeria, the Senate, has passed into Law the Fiscal Responsibility Bill. This Law would, when assented to by the President of Nigeria, seek to control the ways and manner of government spending and borrowings in Nigeria.
Legal Alert - February 2007- Dishonoured Cheques Law in Nigeria
An important medium for advancing business life is the reliability of bills of exchange in any country. For many years in Nigeria, Cheques have being the most common bill of exchange used in everyday transaction. Unfortunately, the confidence in this medium of exchange has continued to dwindle because of the lack of integrity, knowledge and or enforcement of the legal effect of giving a Cheque to another party which is returned unsettled upon its presentation.
This Alert is a contribution to remind you of the existence of this Law and its possible enforcement by you.
What is a Cheque?
A Cheque is simply an instrument instructing the Issuer’s Bank to pay the Bearer named on the Cheque, on demand, the value stated on the Cheque on the named day.
A Cheque is dishonoured when on presentation value is not given to the Bearer because the Issuer’s account is insufficiently funded or as in some cases, the Bank account of the Issuer of the Cheque is dormant or does not exist. See Black’s Law Dictionary (Seventh Edition).
Where a Cheque is however returned because it lacks proper indorsement like irregular signature or the amount in words being different from those in figures, the Cheque is not said to be dishonoured provided that when brought to the Issuer’s attention, the error is corrected by the Issuer of the Cheque.
The Dishonoured Cheque (Offences) Act
The Dishonoured Cheques (Offences) Act was enacted to make it an offence for any person anywhere in Nigeria to induce the delivery of any asset or property or to when settling any lawful obligation, writes a Cheque which when presented within a reasonable period of time is dishonoured on grounds of lack of funds or insufficient funds in the account of the Issuer of the Cheque. See the explanatory notes to this legislation.
It remains an offence whether the Cheque was issued for benefits that are/were enjoyed by a third party who is not the Issuer of the Cheque.
Penalty for Dishonoured Cheques?
The penalty for issuing a dud or dishonoured Cheque in the case of an individual, when found guilty of the offence, is a term of imprisonment for two years without the option of a fine. For corporate organisations, the penalty on being found guilty is a fine of not less than N5,000 (Five Thousand) Naira.
Where it is established that a key Officer of a corporate body connived or consented to the dishonouring of a Cheque, such an individual would also be guilty of an offence with his corporate body and sentenced personally to a term of two years imprisonment without the option of a fine.
Protection of Issuer of Dishonoured Cheque
The protection available to the Issuer of a dishonoured Cheque is for him to prove to the satisfaction of the arraigning Court that when he issued the Cheque, he had reasonable grounds for believing and did in fact believe that the Cheque would be honoured for payment on presentation within the period specified as he had sufficient funds in his Bank account. See Section 1(3) of the Dishonoured Cheques (Offences) Act.
Dishonoured Cheques & Economic Crimes in Nigeria
The case can be made that the issuers of dishonoured Cheques are also liable to conviction under the Economic & Financial Crimes Act.
An economic crime is described under the latter above mentioned legislation to be “… the non-violent criminal and illicit activity committed with the objectives of earning wealth illegally…..”
Amendment of the Dishonoured Cheques (Offences) Act
The enforcement of the provisions of the Dishonoured Cheques Law in Nigeria remains questionable if at all in existence. There is no evidence of any person or corporate body that has either been arraigned before a Court of Law or found guilty of giving a dishonoured Cheque. Presently, the practice of issuing Cheques knowing that they would be dishonoured on presentation is on the increase.
There is before the Nigerian National Assembly a Bill which seeks to amend the provisions of the Dishonoured Cheques (Offences) Act. The Bill seeks to address the above problem by among others requiring the establishment of special business Courts to try these kinds of business crimes, and (2) empowering the Economic & Financial Crime Commission to prosecute offenders under this Law.
It is essential that for the desired growth to occur in the Nigerian economy, confidence and integrity in our commercial instruments - especially Cheques -and systems must be restored and enhanced. The continuing enactment of new Laws when the old ones have not been implemented or enforced at all would only increase the distrust in our financial systems and environment.
Private businesses must recognise that the most important commandment in business is trust and integrity in financial instruments issued by them to other parties.
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EHIJEAGBON O. OSEROGHO