Reversal of transaction by bank of depositing cheque proceeds

A party owed me money and gave me a cheque. I deposited it and got a credit to my account. After 3 days the transaction got reversed and the amount is debited to my account. I received a letter that the cheque got dishonoured due to improper signature. The party accepts that he managed to revoke it. Now I am battling a Section 138 Negotiable Instruments Act case with him. I only want to know if banks allow reversal of transactions as in this case. If so what is the procedure to do so and in what circumstances they allow it. If this is not a standard practice, can I approach consumer forum and lodge a complaint against the bank?

Answer: Usually, a bank would not reverse a transaction in the manner mentioned by you. Perhaps, the chain of events may be slightly different. My understanding of how banks work shows that the chain of events may be slightly different from what you have mentioned.

What happens is that when you deposit a cheque in your bank account, sometimes the bank shows credit of the cheque proceeds in your account without first waiting for its clearance. In such a case, the “value date” of the credit may also sometimes be a future date (one or two days in future). This means that while the credit is shown in your account, you cannot withdraw the amount since it is not reflected in the balance. However, there are some instances where the banks accommodate a valued and trustworthy account holder to withdraw money against the cheque deposited even though it has not been formally cleared. In either case, subsequently, if the cheque is dishonoured for whatever reason, the bank may reverse the transaction of having credited cheque proceeds in your account in advance / in anticipation. This is what generally happens. If this is the scenario in your case also, the bank may not be at fault. The opposite party telling you that he managed to “revoke” the cheque transaction may perhaps be referring to the fact of asking and “getting” his own bank to not clear the cheque in the first instance by showing difference of signatures. Likewise, delay of 3 days in reversal of transaction may sometimes be due to intervening holidays.

However, if you genuinely believe that the above-mentioned probable chain of events has not occurred in your case and that in your case the cheque proceeds were credited to your bank account after due clearance of the cheque and that it was only afterwards that the transaction was reversed, then you’ve to look for other reasons. In such a scenario, though it may not perhaps be relevant in your case, sometimes after clearing of the cheque, the drawee bank may receive a complaint from the drawer of the cheque (i.e., the person who issued the cheque) that the cheque was fraudulently obtained or was lost, and it did not have his signatures; in such situations, it may happen that the drawee bank might perhaps genuinely request your bank for reversal of transaction after verifying the details; and, this may be to avoid a fraud. Of course, I think this was not the factual position in your case. But, it shows that there is at least a need to make enquiries with the banks (with your bank as well as the drawee bank, if needed) to ascertain the correct factual position.

Now, if you find that the bank has deliberately or negligently reversed the credit transaction and the above scenarios do not apply in your case, then of course, you may have to take necessary remedial action. Following suggestions are given in this regard:

(1) Since each bank has a grievance cell and a dedicated toll-free number of customer care, you may ascertain the same from the bank’s website and make a complaint to them in the first instance. Sometimes, the bank may itself resolve your issue to your satisfaction.

(2) If your complaint is not resolved within a period of one month by the bank in the manner mentioned above, you may approach the Ombudsman of the bank. Note that baking ombudsman is a senior official appointed by the Reserve Bank of India to redress customer complaints relating to deficiency in banking services.

(3) However, if the banking ombudsman is also not able to resolve your issue, you may have to approach the consumer forum.

(4) If, through your enquiry, you notice the presence of criminality in the reversal of transaction (such as forgery), you may even consider filing a criminal case against those responsible.