What is the meaning of “Exceeds Arrangement” in terms of Banking | Dishonour of Cheque – Section 138

 

What is the meaning of “Exceeds Arrangement” in terms of Banking  ? 

Let us understand the meaning of “Exceeds Arrangement” in terms of banking.

To make the term more clear let us take the example. “Suppose you have received a cheque of Rs. 1 Lakh, and when you insert the cheque in bank for clearance,  your cheque get returned by bank quoting the reason “Exceed Arrangement” Now what does it mean. It means that the other party does not have enough money in his account and has not “arranged” with the bank to borrow enough money to pay the cheque.

The reason “exceeds arrangements” is typically used by bankers to mean insufficient funds in an account, where the account has been given credit facilities (like cash credit/overdraft). You may send notice under section 138. In fact, you may send notices u/s 138 regardless of the reason of cheque return.

Section 138 in The Negotiable Instruments Act, 1881
 
Section 138  : Dishonour of cheque for insufficiency, etc., of funds in the account. —Where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall, without prejudice to any other provisions of this Act, be punished with imprisonment for a term which may be extended to two years, or with fine which may extend to twice the amount of the cheque, or with both.

 

 

 

Comments

  1. Great Content. Precise information. Thank you for choosing this important topic.

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