CAN DUE CHECKS BE SUBMITTED TO THE BANK? 03 April 2020

As we explain in detail in our bulletins, in order for legal and business life to comply with extraordinary conditions brought on by COVID-19 epidemic disease, a set of provisions are provided for in “Law No. 7226 Related To Making Amendments On Some Laws” dated 25.03.2020, which entered into force on the date noted, when it was published in the Official Gazette.

As you may recall, Law No. 7226 is brought a regulation one-to-one with this expression “(1) Due to the fact that COVID-19 epidemic disease is seen in our country, and in order to prevent the loss of legal rights;  a) All periods regarding the origination, exercise and termination of any rights, including but not limited to periods pertaining to litigation, enforcement proceedings, applications, complaints, objections, warnings, notices, submissions and statutes of limitation, foreclosure and mandatory administrative application periods … are suspended as of March 13, 2020 (inclusive of this date), to April 30, 2020 (inclusive of this date).  These periods shall start to run the day after the suspension period ends. Pperiods that expire in fifteen days or less as of the suspension period, shall be deemed to be extended fifteen days from the day after the suspension period ends …” (Law No. 7226 a.1).  Thus, all time limits regarding the origination, exercise and termination of any rights are suspended from 13.03.2020 to 30.04.2020.

If all periods regarding the origination, exercise and termination of any rights are suspended, are submission periods regarding the maturity dates of checks or bonds suspended?

In addition, in case of the submission of checks for payment to banks during the suspension period, will the banks take action?

Above all, what will be happen if the checks submitted to the bank bounce?

These questions have caused a great debate among legal academicians. Many of these legal scholars are of the opinion that checks are not to be submitted to banks during the suspension period, i.e., from 13.03.2020 to 30.04.2020. At present, in practice, banks are accepting checks due for payment and are also taking actions regarding bad checks and bouncing them.

While these debates continue, debates have also arisen about  the provision in Article 1 of the Law No. 7226 which suspends periods regarding the origination, exercise and termination of any rights during suspension period from 13.03.2020 to 30.04.2020, and the highly important matter of how it will affect the rights of other parties who are debtors and creditors.  

Although the banks have, in practice, been processing submitted checks due for payment, including bouncing , we would like to emphasise there are legal scholars who think Article 1 of the Law No. 7226 applies to all checks, which they believe should not be submitted to banks between, and including 13.03.2020 and 30.04.2020, and if submitted, they should not be processed and, more importantly, that the banks would be acting gratuitously if they stamped the checks. 

If the opinion of these legal scholars is taken into consideration in possible disputes in the future, there could be serious legal consequences for both banks and creditors. For instance, a check whose due date is 02.04.2020, is submitted to bank today and is bounced due to fact there are insufficient funds in the debtor’s account to cover it, it may be that future enforcement proceedings related to this check may be cancelled by courts. Such a cancellation could be based on the fact the check was submitted during the suspension period, and despite there being insufficient funds to cover it, the proceedings could be quashed according to applicable code.

On the other hand, in terms of firms suffering financial difficulty, and are more affected from COVID-19 epidemic disease than others, although checks in their favour should not be accepted by banks given the suspension period regarding their submission, not accepting these checks has caused, and will continue to cause, major problems both economically and legally. These issues need to be addressed by specific regulations or otherwise clarified by explanations from governmental authorities.

We state that we continue to report on Law No. 7226, and the debates related to it.