BATAS PAMBANSA BLG. 22: ANNOTATEDThis is an annotation ofBatas Pambansa Blg. ("BP") 22-- "AnAct Penalizing the Making or Drawing and Issuance of a CheckWithout 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 ofbounced checks. What the law punishes is the issuance ofa bouncing check and not the purpose for which the checkwas issued, nor the terms and conditions of its issuance. Todetermine the reasons for which checks are issued, or the termsand conditions for their issuance, will greatly erode the faiththe public reposes in the stability and commercial valueof checks as currency substitutes, and bring about havoc intrade 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 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 of not less than thirty days but not more than one (1) year or by a fine of not less than but not more than double the amount of the check which fine shall in no case exceed Two Hundred Thousand Pesos, or both such fine and imprisonment at the discretion of the court.

The same penalty shall be imposed upon any person who, having sufficient funds in or credit with the drawee bank when he makes or draws and issues a check, 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 ninety (90) days from the date appearing thereon, for which reason it is dishonored by the drawee bank.

Where the check is drawn by a corporation, company or entity, the person or persons who actually signed the check in behalf of such drawer shall be liable under this Act.

Annotation:

Section 1 of the Bouncing Checks Law penalizes two distinctacts (Bautista vs. Court of Appeals, G.R. No. 143375,6 July 2001):

(1) Making or drawing and issuing any check to applyon account or for value, knowing at the time of issuethat the drawer does not have sufficient funds in orcredit with the drawee bank.

(2) Having sufficient funds in or credit with thedrawee bank shall fail to keep sufficient funds or tomaintain a credit to cover the full amount of thecheck if presented within a period of 90 days fromthe date appearing thereon, for which reason it isdishonored by the drawee bank.

In the first paragraph, the drawer knows that he does not havesufficient funds to cover the check at the time of its issuance,while in the second paragraph, the drawer has sufficient fundsat the time of issuance but fails to keep sufficient funds ormaintain credit within ninety (90) days from the date appearingon the check. In both instances, the offense is consummatedby the dishonor of the check for insufficiency of funds or credit.

The check involved in the first offense is worthless at the timeof issuance since the drawer had neither sufficient funds innor credit with the drawee bank at the time, while thatinvolved in the second offense is good when issued as drawerhad sufficient funds in or credit with the drawee bank whenissued. Under the first offense, the 90-day presentmentperiod is not expressly provided, while such period is an expresselement 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 onaccount or for value;(2) knowledge by the maker, drawer, or issuer thatat the time of issue he did not have sufficientfunds in or credit with the drawee bank for thepayment of such check in full upon presentment;and(3) said check is subsequently dishonored by thedrawee bank for insufficiency of funds or credit,or would have been dishonored for the samereason 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 penaltiesInA.M. No. 00-11-01-SC(2001), the Supreme Court clarifiedthat the earlier circular, Administrative Circular 12-2000, did notremove imprisonment as an alternative penalty for violationsof B.P. Blg. 22. The Judges may, "in the exercise of sounddiscretion, and taking into consideration the peculiarcircumstances of each case, determine whether theimposition of a fine alone would best serve the interests ofjustice or whether forbearing to impose imprisonment woulddepreciate the seriousness of the offense, work violenceon the social order, or otherwise be contrary to theimperatives of justice." Also, "[s]hould only a fine be imposedand the accused be unable to pay the fine, there is no legalobstacle to the application of theRevised Penal Codeprovisions on subsidiary imprisonment."

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.

Annotation:The second element of the offense is the knowledge of theaccused about the insufficiency of funds. It must be shownbeyond reasonable doubt that the accused knew of theinsufficiency of funds at the time the check was issued.Section 2 provides that the accused must be notified of thedishonor.

The prosecution must establish that the accused was actuallynotified that the check was dishonored, and that he or shefailed, within five banking days from receipt of the notice, topay the holder of the check the amount due thereon or to makearrangement for its payment. The notice of dishonor of a checkto the maker must be in writing. A mere oral notice to thedrawer or maker of the dishonor of his check is not enough.It's true that Section 2 does not state that the notice ofdishonor be in writing. This, however, should be taken inconjunction with Section 3, which provides that where thereare no sufficient funds in or credit with such drawee bank,such fact shall always be explicitly stated in the notice ofdishonor or refusal.This is consistent with the rule that penalstatutes have to be construed strictly against the State andliberally in favor of the accused. Without a written notice ofdishonor of the checks, there is no way of determiningwhen the 5-day period prescribed in Section 2 would startand end. (Bax vs. People, G.R. No. 149858, 5 September 2007,citingRico vs. People, G.R. No. 137191, 18 November 2002,392 SCRA 61)

In other words, the prima facie presumption arises when acheck is issued. But the law also provides that the presumptiondoes not arise when the issuer pays the amount of the checkor makes arrangement for its payment "within five banking daysafter receiving notice that such check has not been paid bythe drawee." Verily, BP 22 gives the accused an opportunity tosatisfy the amount indicated in the check and thus avertprosecution.(King vs. People, G.R. No. 131540, 2 December 1999)

The foregoing discussion abundantly shows that the noticemust be in writing. A verbal and indirect notice, however,was found to be sufficient in the case ofYulo vs. People,G.R. No. 142762, 4 March 2005. The pertinent finding of factin this case is as follows:

As Myrna [the complainant] did not knowpetitioners [the accused] address, she immediatelyinformed Josefina [the "best friend of the accused]about the dishonored checks. The latter told Myrnanot to worry and repeated her assurance thatpetitioner is her best friend and a good payer.Myrna tried to get petitioners address from Josefina,but the latter refused and instead made theassurance that she will inform petitioner that thechecks were dishonored.

It is clear from these findings that there was nowritten notice given to the accused. It is also clearthat no notice, even a verbal notice, was givendirectly to the accused. Still, the Supreme Courtconcluded that:

We likewise find no reason to sustain petitionerscontention that she was not given any notice ofdishonor. Myrna had no reason to be suspiciousof petitioner. It will be recalled that JosefinaDimalanta assured Myrna that petitioner is her"best friend" and "a good payer." Consequently,when the checks bounced, Myrna would naturallyturn to Josefina for help. We note that Josefinarefused to give Myrna petitioners address butpromised to inform petitioner about the dishonoredchecks.

This ruling would appear to be inconsistent withthe required burden of proof and the rule ofinterpretation of penal laws, succinctly noted inKing vs. People, thus:

We must stress that BP 22, like all penalstatutes, is construed strictly againstthe State and liberally in favor of theaccused. Likewise, the prosecution hasthe burden to prove beyond reasonabledoubt each element of the crime. Hence,the prosecutions case must rise orfall on the strength of its ownevidence, never on the weakness oreven absence of that of the defense.

Section 3.Duty of drawee; rules of evidence. - It shall be the duty of the drawee of any check, when refusing to pay the same to the holder thereof upon presentment, to cause to be written, printed, or stamped in plain language thereon, or attached thereto, the reason for drawee's dishonor or refusal to pay the same: Provided, 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.

In all prosecutions under this Act, the introduction in evidence of any unpaid and dishonored check, having the drawee's refusal to pay stamped or written thereon or attached thereto, with the reason therefor as aforesaid, shall be prima facie

Not with standing receipt of an order to stop payment, the drawee shall state in the notice that there were no sufficient funds in or credit with such bank for the payment in full of such check, if such be the fact.

Annotation:

The third element of the offense is the dishonor of the check.Under Section 3, "the introduction in evidence of any unpaid anddishonored check, having the drawees refusal to pay stamped orwritten thereon, or attached thereto, with the reason thereforas aforesaid, shall be prima facie evidence of the making orissuance of said check, and the due presentment to the draweefor payment and the dishonor thereof, and that the same wasproperly dishonored for the reason written, stamped, orattached by the drawee on such dishonored check." Forinstance, in the case ofKing vs. People(supra), the prosecutionpresented the checks which were stamped with the wordsACCOUNT CLOSED, supported by the returned check ticketsissued by the depository bank stating that the checks had beendishonored. The documents constitute prima facie evidence thatthe drawee bank dishonored the checks, and no no evidence waspresented to rebut the claim.

Section 4.Credit construed. - The word "credit" as used herein shall be construed to mean an arrangement or understanding with the bank for the payment of such check.

Section 5.Liability under the Revised Penal Code. - Prosecution under this Act shall be without prejudice to any liability for violation of any provision of theRevised Penal Code.

Annotation:

The act of issuing a bouncing check could give rise to separateoffenses punishable under BP 22 and simultaneously under theRevised Penal Code.

Section 6.Separability clause. - If any separable provision of this Act be declared unconstitutional, the remaining provisions shall continue to be in force.

Annotation:

The attacks on the constitutionality of BP 22, as discussed inLozano vs. Martinez (G.R. No. L-63419, 18 December 1986),are the following: (1) it offends the constitutional provisionforbidding imprisonment for debt; (2) it impairs freedom ofcontract; (3) it contravenes the equal protection clause;(4) it unduly delegates legislative and executive powers;and (5) its enactment is flawed in that during its passagethe Interim Batasan violated the constitutional provisionprohibiting amendments to a bill on Third Reading. Unlessotherwise indicated, the succeeding discussions are liftedfromLozano.

Non-imprisonment for debt

It had been argued that BP 22 runs counter to the inhibitionin the Bill of Rights which states, "No person shall beimprisoned for debt or non-payment of a poll tax." Since theoffense under BP 22 is consummated only upon the dishonoror non-payment of the check when it is presented to thedrawee bank, the statute is really a "bad debt law" rather thana "bad check law." What it punishes is the non-payment ofthe check, not the act of issuing it. The statute, it isclaimed, is nothing more than a veiled device to coercepayment of a debt under the threat of penal sanction.

The gravamen of the offense punished by BP 22 is theact of making and issuing a worthless check or a check thatis dishonored upon its presentation for payment. It is not thenon-payment of an obligation which the law punishes. The lawis not intended or designed to coerce a debtor to pay his debt.The thrust of the law is to prohibit, under pain of penalsanctions, the making of worthless checks and putting them incirculation. Because of its deleterious effects on the publicinterest, the practice is proscribed by the law. The lawpunishes the act not as an offense against property, butan offense against public order.

It may be constitutionally impermissible for the legislature topenalize a person for non-payment of a debt ex contractu.But certainly it is within the prerogative of the lawmakingbody to proscribe certain acts deemed pernicious and inimicalto public welfare. Acts mala in se are not the only acts whichthe law can punish. An act may not be considered bysociety as inherently wrong, hence, not malum in se butbecause of the harm that it inflicts on the community, it canbe 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 legislaturethat, as a matter of public policy, the making and issuanceof a worthless check is deemed public nuisance to be abatedby the imposition of penal sanctions. It had been reported thatthe approximate value of bouncing checks per day was closeto 200 million pesos.

It is not for the court to question the wisdom or policy ofthe statute. It is sufficient that a reasonable nexus existsbetween means and end. Considering the factual and legalantecedents that led to the adoption of the statute, it is notdifficult to understand the public concern which promptedits enactment.

Impairment of freedom of contract

Article III, Section 10 of theConstitutionprovides that:"No law impairing the obligation of contracts shall be passed." However, the freedom of contract which is constitutionallyprotected is freedom to enter into "lawful" contracts. Contractswhich contravene public policy are not lawful. Checks can notbe categorized as mere contracts. It is a commercial instrumentwhich, in this modem day and age, has become a convenientsubstitute for money; it forms part of the banking system andtherefore not entirely free from the regulatory power of the state.

Equal protection of the laws

The challenge is to the effect thatBP 22is discriminatory or isviolative of the equal protection of the laws since it penalizesthe drawer of the check, but not the payee. It had been arguedthat the payee is just as responsible for the crime as the drawerof the check, since without the indispensable participationof the payee by his acceptance of the check there would be nocrime. It is settled, however, that the clause "equal protectionof the laws" does not preclude classification of individuals, whomay be accorded different treatment under the law as long asthe classification is no unreasonable or arbitrary. The argumentpremised on the equal protection of the law is tantamount tosaying that, to give equal protection, the law should punish boththe swindler and the swindled.

Improper delegation of legislative powers

It had been argued that the law violates the Constitutionalprohibition against the delegation of legislative power, on thetheory that the offense is not completed by the sole act of themaker or drawer but is made to depend on the will of thepayee -- if the payee does not present the check to the bankfor 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 isthe power to legislate, or the power to make laws. which means,as applied to the present case, the power to define the offensesought to be punished and to prescribe the penalty. Byno stretch of logic or imagination can it be said that the power todefine the crime and prescribe the penalty therefor has been inany manner delegated to the payee. Neither is there any provisionin 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 the1973 Constitutionwas violated by the legislative body when itenacted BP 22 into law. This constitutional provision prohibitsthe introduction of amendments to a bill during the ThirdReading. It is claimed that during its Third Reading, the billwhich eventually became BP 22 was amended in that the textof the second paragraph of Section 1 of the bill as adoptedon Second Reading was altered or changed in the printed textof the bill submitted for approval on Third Reading. However,it is clear from the records that the text of the secondparagraph of Section 1 ofBP 22is the text which was actuallyapproved by the body on Second Reading.

Section 7. Effectivity. - This Act shall take effect fifteen daysafter publication in the Official Gazette. evidence of the makingor issuance of said check, and the due presentment to thedrawee for payment and the dishonor thereof, and that thesame was properly dishonored for the reason written, stampedor attached by the drawee on such dishonored check.http://jlp-law.com/jurisprudenceBouncing 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 non-delivery 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.

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

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 as she did not agree to any settlement anymore.

I admit to be a bit angry because of her inconsideration. Then, I received a demand letter asking me to pay all my debts otherwise 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 borrowing of money is accompanied with an act which is punishable by law with imprisonment or penalty, the debtor may be criminally liable not for the non-payment of debt but for the commission of the crime. As in your case, borrowing, alone, of money will not make you criminally liable. But your issuance of postdated checks which were later dishonored for insufficiency of funds constitutes a crime of either violation of Batas Pambansa Blg. 22 (B.P. 22) or Estafa.

BP 22, commonly referred to as Bouncing Checks Law, punishes any person who makes or draws and issues any checks 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 upon its presentment. On the other hand, the maker or issuer may likewise be liable for estafa punishable under Article 315 of the Revised Penal Code if he issues a check for payment of an obligation using false pretense or fraudulent act.

Thus, your creditor may pursue either a criminal case for violation of B.P. 22 and/or estafa against you depending on the events surrounding your issuance of postdated checks. The penalty of twenty (20) years for the issuance of unfunded check is not a threat for you to pay in full the amount of the checks. The said imprisonment is the maximum penalty which can be imposed upon an accused in an estafa case under Article 315 of the Revised Penal Code, which states that the penalty of prision correccional in its maximum period to prision mayor in its 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-checks-constitute-crime-of-estafa/54865/No Imprisonment in BP 22 or Bouncing Checks Cases in Philippine Law?

inAdvice,Finance & Accounting,Money & SuccessJanuary 31, 2013 Comments Off12503 Viewsby 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 violatingBatas Pambansa (BP) Blg. 22or theAnti-Bouncing Checkslaw, its possible that no imprisonment will be imposed. The Supreme Court had long issued aCircularcontaining 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. 00-11-01-SC)clarifying that the clear tenor and intention ofAdministrative Circular No. 12-2000is 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

Bouncedchequesare one of the most commonoffencesplaguing the financial world. According to the Supreme Court, there are over 40lakhsuch pending cases in the country. Achequecan bedishonouredfor various reasons, the most common being insufficient funds in the account of the person drawing thecheque, and a mismatch of signatures with the bank records. But what do you do if you land a badcheque? Here's a step-by-step guide to the legal recourse that is available to you.

Filing a criminal complaintWhen 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 suitWhile 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.

ExceptionsThese 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 defaultersA 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!

By Kelvin Lee

Question of Law

Wednesday, May 22, 2013

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.

This week, let us discuss, briefly, the elements of a violation of Sec. 1 of B.P. 22.

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,

ordered the bank to stop payment. (Caras vs. Court of Appeals, G.R. No. 129900, 2 October 2001)

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.

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.

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.

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.