Consider going to a bank, depositing a cheque, and having the cheque returned without payment. The majority of people ignore it because they believe it to be a banking problem. In real life, though, this might lead to a serious legal issue which is a criminal offence under the Negotiable Instrument Act, 1881.
For expert assistance in cheque bounce cases, you may consider consulting Prime Legal, Bangalore’s best law firm.
What Is a Cheque Bounce Case?
A cheque bounce, referred to as dishonour of cheque, takes place when a cheque is presented to a bank, and the bank refuses to process it, sending the cheque back to the payee.
The drawer, drawee, and payee are the parties involved in a cheque
- The account holder, who is authorized to write and sign cheques, is known as the Drawer.
- The drawee is the bank that receives the cheque and is directed to process the payment.
- The Payee is the individual who has the right to receive the funds and whose name appears on the cheque.
For example, “A” (the Drawer) gives a cheque to “B” (the Payee). B presents the cheque to the bank (Drawee) for payment. However, the bank returns the cheque unpaid. This is known as Cheque bounce or dishonour of cheque.
According to section 138 of the Negotiable instrument act, cheque bounce or dishonour of cheque is considered as a criminal offence.
Common Reasons For Cheque Bounce
The bank may reject a cheque for a various of reasons, among these are the following reasons:
1. Insufficient Funds
If there is not enough money in the drawer’s bank account, a cheque may bounce.
2. Signature Mismatched
The cheque will not be accepted if the signature on it differs from the registered signature.
3. Defective Cheque
A cheque that has been corrected, overwritten, or scrawled on may bounce. If a cheque is broken or deformed, the banks will not accept it.
4. Account Closed or Dormant
The cheque may bounce if there haven’t been any transactions for a long time, indicating that the account is dormant or inoperative.
5. Stop Payment Instruction
If a cheque is issued in the bank for payment and is received unpaid as payment stopped by the drawer, it is also considered dishonour of the cheque.
Legal Procedure in Cheque Bounce Cases (Step-by-Step)
Cheque bounce or dishonour of cheque is a criminal offence under section 138 of Negotiable Instruments Act, 1881 that carries a sentence of two years imprisonment, a fine equal to twice the amount of the cheque, or both if a cheque is issued to settle a debt, either entirely or partially, and it is received unpaid to insufficient funds or exceeds the agreed-upon limit. This law applies only
- If the cheque is presented within 6 months from the date of issue or within the validity period.
- If the payee sends a Demand legal notice to the drawer within 30 days from receiving the information from the bank that the cheque is bounced.
- If the drawer fails to make payment within 15 days from receiving such notice.
Step 1 – Cheque Return Memo
The bank notifies the payee that the cheque is dishonored by sending them a Cheque Return Memo.
Step 2 – Sending a Legal Notice Within 30 Days
Within 30 days of learning from the bank that the cheque has bounced, the payee must issue a demand legal notice to the drawer.
Step 3 – 15 Days Time Period
After getting this notice, the drawer has 15 days to make a payment.
Step 4 – Filing a Criminal Complaint
A criminal complaint may be filed against the drawer within the next 30 days if payment is not made within 15 days of receiving the notice.
Documents Required for a Cheque Bounce Case
The documents that are required for a cheque bounce case are as follows
1. Original Cheque:
The Original cheque that was dishonored by the bank.
2. Cheque Written Memo
A copy Cheque Written Memo which evidencing that the payee was notified by the bank along with reason for dishonour.
3. Legal Notice
A copy of legal notice evidencing that the payee was intimated to the drawer about the cheque bounce and demanded to reply within 15 days.
4. Postal Receipt
A copy of postal receipt evidencing that the legal notice was sent and delivered to the drawer.
5. Complaint Petition
The complaint petition to be filed in the magistrate along with all the attachment of the above mentioned documents.
Penalties And Punishment Under Section 138
According to section 138 of the Negotiable Instruments Act, 1881, “cheque bounce” or “dishonour of cheque” is a criminal offence that carries
- a sentence of two years in prison,
- a fine equal to twice the cheque’s amount,
- or both
if a cheque is issued to settle a debt, either fully or partially, and it is received unpaid to insufficient funds or exceeds the agreed-upon limit.
Defence Available for Cheque Bounce Cases
1. No Legal Enforceable Debt
The drawer could assert a defense by saying that the cheque’s principal purpose was not to pay off debt. The cheque was mostly issued as a gift, donation, or security deposit that had not yet occurred.
2. Limitation Period expired
Presenting the cheque must happen within six months of the date of issuance or throughout the validity term. If not, this can be used as a defense by the drawer.
3. Issuance of Legal Notice
After obtaining the cheque return memo from the bank, the payee has 30 days to give the drawer a written demand notice. If not the drawer could assert a defense by saying he did not receive legal notice as per the time limit.
Can Cheque Bounce Case Be Settled?
1. Compundable Offence
As per Section 147 of the Negotiable Instrument Act, 1881, every offence punishable under this act is compoundable in nature. Which means the parties may mutually agree to compromise and settle the matter outside the court
2. Settlement Before or During the Trial
Both parties may reach a settlement outside of court even after the case has been filed, and the court will record the settlement reached.
3. Role of Legal Negotiation
Cheque bounce cases require a good experience for detailing, drafting, negotiation. For professional assistance you may consult a dispute resolution law firm, to handle and negotiate your cheque bounce case with high expertise.
Conclusion
Timelines and procedures are crucial in cheque bounce cases, which require careful attention. Experts should handle it. If you are facing or filing a cheque bounce case, consult the best law firm in Bangalore for effective legal support and recovery
FAQ
1. Is cheque bounce a criminal offence?
Yes, cheque bounce case is a criminal offence as per Section 138 of the Negotiable Instrument Act, 1881.
2. Can a company file a Cheque Bounce case?
Yes, A company can also file a Cheque Bounce case.
3. Is jail mandatory in cheque bounce cases?
Cheque bounce or dishonour of cheque is a criminal offence under section 138 of Negotiable Instruments Act, 1881 that carries a sentence of two years imprisonment, a fine equal to twice the amount of the cheque, or both if a cheque is issued to settle a debt, either entirely or partially
4. Can cheque bounce case be filed online?
yes , through the ecourt Indian Services website.
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