A case of a cheque bounce implies a significant monetary and legal battle instigated when the cheque is returned by the bank as unpaid. Cheque dishonour is seen as a criminal offence in India owing to the fact that it disrupts the commercial flow and creates a lack of trust in the banking system. Therefore, one cannot underestimate the importance of acting in accordance with the requirements of the law if the offended party wants to get their money back. A glance at the process described in India’s Negotiable Instruments Act makes it evident that there is a strict path that must be followed, starting from the moment of the dishonour of the cheque and moving forward to the sending of the notice and the lodging of a criminal complaint.
Contact us, if you are looking for experienced Prime Legal cheque bounce lawyers in Bangalore can help you assess the proper legal course of action.
What Is A Cheque Bounce Case?
Understanding Cheque Dishonour
A cheque bounce is an event in which a cheque is presented for payment but is returned by the drawee bank. In this regard, several common reasons exist for cheques to be dishonoured, such as a lack of funds in the account of the drawer and faults in the cheque paper. It is imperative to know the difference between a cheque bounce and a cheque return, in that while a return may be due to rectifiable technical problems, a bounce is always due to a default of a financial nature and invokes penal liability.
Laws Governing Cheque Bounce Cases
The primary act governing these matters is the Negotiable Instruments Act, 1881, in which Section 138 mentions that cheque bouncing constitutes a crime and provides the relevant penalties. However, to be able to successfully file under this act, there are certain necessary conditions to be fulfilled when the cheque bounce offence is committed, which include the following: the cheque must have been issued in consideration of some legally enforceable debt and should have bounced after a valid notice of 15 days has been given.
Common Reasons for Cheque Bounce
There are various reasons for cheque bounce, which include:
- Insufficient Funds: Insufficient funds are the most common reason for making a complaint under Section 138. This happens when the balance in the drawer’s bank account is insufficient to make the payment of the amount mentioned in the cheque, which is presented by the payee.
- Signature Mismatch: If there is a signature mismatch, a bank will refuse payment. If the drawer’s signature on the cheque does not match the specimen signature held by the bank, the cheque will be dishonoured.
- Account Closed: Another common instance in such cases is when the drawer draws the cheque from a closed bank account. Dishonour due to account closure is also punishable in the same manner as a cheque bounce owing to insufficient funds
- Stop Payment Instructions: In case the maker reaches out to their bank directly to stop the payment, it would be called the stop payment procedure. The fact that the maker has intentionally stopped the process does not exempt them from punishment under Section 138 since the cheque has been issued for payment of a previously owed amount.
- Alteration or Overwriting: Banks have strict physical requirements for the clearing of instruments, so in case of improper modification or written addition in the name of the payee, date, or sum without the approval of the bank, the cheque will be identified as ineffective.
- Stale or Expired Cheque: A cheque is valid only for a period of three months from the date it was written; thus, presenting a stale cheque to the bank would lead the bank to return it as unpaid.
Step-By-Step Procedure For Filing A Cheque Bounce Case
Step 1- Receive the Cheque Return Memo
The essential first step is to get the cheque return memo from the bank. This is the official proof of dishonour of the cheque. Once you receive the memo, you will have to check the reason for the dishonour so that you can ascertain whether Section 138 of the NI Act is applicable in your case.
Step 2- Send a Legal Notice
Once the payee has received the cheque return memo, he/she is required to send a notice of demand within a period of 30 days from the receipt of the return memo. The contents of the legal notice should clearly mention all the relevant details of the cheque, the nature of the debt, that the cheque has been dishonoured, and that the payment should be made within 15 days. It is important to take care of the mode and manner of serving the notice. Using the method of registered post (in the ordinary course of sending notice) with acknowledgement due is the preferred way to ensure that the drawer has received the demand notice in the required timeline.
For a detailed understanding of how to send a legal notice in India, read our related guide.
Step 3- Wait for the Payment Period
The timeframe set by statute under the NI Act allows the drawer to make the payment following the receipt of the notice. Also, the payee cannot begin legal proceedings at the jurisdiction court until after a period of 15 days from the date the drawer of the cheque was made aware of the legal notice served to him/her.
Step 4 – File a Cheque Bounce Complaint
If the 15-day timeframe lapses(expires) and payment is still not made as per the notice served, the next thing to do would be to decide the jurisdiction of the applicable court. This is usually determined by the branch of the bank of the payee. The step is completed by filing the complaint before the Magistrate within a window of 30 days after the notice period is over.
Step 5 – Court Proceedings
As soon as the complaint is filed, the judge takes notice of the matter and issues a notice to the accused drawer, commanding him to appear in court. The matter will then further require a formal trial where both parties will put forth their witnesses and evidence, which will finally result in a judgment either convicting the accused or acquitting the accused.
Time Limits In Cheque Bounce Cases
1. Timeline for Presenting the Cheque
In a bid to ensure proper management of cheque presentation, strict timelines have been established through laws in the country. As the name (payee) suggests, the cheque must be handed in to the bank within a span of three months, after which the payee will lose his/her legal protection.
2. Timeline for Sending the Legal Notice
The timeline for sending the legal notice states that the statutory demand should be sent out precisely within 30 days after the return mail memo is received by the bank.
3. Timeline for Filing the Complaint
The timeline for filing the complaint allows 30 days for the complainant to file the complaint after the bank has completed the 15-day notice period, during which the payee had the opportunity to respond to the notice.
4. Consequences of Missing Deadlines
The consequences for missing deadlines are extremely serious since noncompliance with the deadlines will make the complaint time-barred.
Documents Required For A Cheque Bounce Case
The original cheque is the first piece of evidence since it was the cheque accepted by the bank and subsequently dishonoured. Also, the bank return memo is important because it gives a formal date and reason for the bounced cheque in the dispute. A copy of the original legal notice that was provided to the drawer is necessary to show that the statutory demand was sent to the accused in the disputed matter. The receipt of the postal service through which the demand was made, along with the proof of delivery, is essential to help the Magistrate in providing evidence that the legal notice was duly served to the accused party. If more evidence can be presented to show the existence of valid debt against the accused, such as ledgers, a loan agreement or invoices signed, it may help in providing a more solid proof for the complaint description.
Punishment For Cheque Bounce Under Section 138
Individuals convicted under Section 138 of the Negotiable Instruments Act can be imprisoned for up to two years. Apart from imprisonment, the court can also choose to impose a fine as well as compensation in case of failure to repay the amount defined in the cheque, or double the amount of the dishonoured cheque. Compensation is normally set at an amount equal to the amount of the cheque involved in the dispute. Given the large number of cases to be settled in court, judges are advised to make use of Lok Adalats wherever possible to facilitate the resolution process.
Defences Available In Cheque Bounce Cases
A strong defence argument is to establish that there is no enforceable debt owed, stating that the cheque was issued without any obligation under the law. Also, the defence might say that the accused has written an expired cheque, which is why the bank’s refusal is one of procedure and not any criminal liability. The defence can claim that notice was not duly given, so that the accused did not get the benefit of the statutory right to arrange for funds within 15 days. Another argument that is often used is to say that the cheque was just a guarantee. But the courts will look into this matter closely to find out if there was any legitimate debt at the time the cheque was presented.
Can a Cheque Bounce Case Be Settled?
The quickest manner of getting the problem resolved is by means of settlement prior to initiating the complaint process. In case the drawee pays what is due during the 15 days of notification, the dispute will be fully resolved. Even when the litigation process is on, the parties involved may settle the issue with one another, making a common repayment scheme for the discharge of the case. As per the law of India, the issue of cheque bounce has a provision for compounding the offence. The complainant will be able to withdraw the case after receiving payments.
Why You May Need a Cheque Bounce Lawyer
A skilled lawyer makes sure that a legally sound notice is created, fulfilling all requirements set in the law, since even a small mistake can prove fatal for the case. A Lawyer makes sure that the claim is filed on time and that no strict deadlines are missed. Also, Criminal trials are full of intricate cross-examinations, and this is why it is crucial to have strong court representation to protect your interests. A lawyer also acts as a professional mediator and helps negotiate a deal effectively, saving the clients from lengthy trials and helping them get their money quicker. Contact Us, if you are looking for a lawyer for cheque bounce case.
How Prime Legal Can Help In Cheque Bounce Cases
1. Legal Notice Drafting
Our professionals at Prime Legal are adept at drafting legal notices and make sure that all the statutory requirements are satisfied to ensure the seamless progress of your case.
2. Complaint Filing Assistance
We will help you in every step of filing the complaint by efficiently managing your documents and dealing with the court registry on your behalf.
3. Court Representation
The experienced lawyers of our firm provide vigorous and effective representation in court on behalf of clients at all stages of litigation, from the very first summons to the final verdict.
4. Recovery of Cheque Amount
It is our foremost goal not only to win the legal battle but also to recover the cheque amount for our clients. In this regard, you can have complete faith in Prime Legal.
Contact Us, if you are looking for a cheque bounce lawyers in Bangalore
Conclusion
A bounced cheque case involves many legal deadlines and procedures. For the sake of your interest, it is necessary to act fast, keep and preserve documents and issue a proper notice. Most of all, however, hiring an attorney is likely to protect your rights and improve the chances of recovering the amount of the bounced cheque.
Frequently Asked Questions (FAQS)
1. What are the common reasons for cheque bounce?
The most common causes of cheque bounce are inadequate funds in the drawee’s account, signature mismatch, dishonouring of a cheque of a closed account, a stop-payment order given to the bank, illegal modification of the cheque, and the use of an expired cheque.
2. How many days do I have to send a legal notice?
You must send the legal notice within 30 days after getting the cheque return memo from the bank.
3. What documents are required to file a cheque bounce case?
When filing a case for cheque bounce, it is crucial to furnish the original dishonoured cheque with a cheque return memo from the bank, a legal notice copy, proof of delivering the notice, etc.
4. What is the punishment for cheque bounce in India?
Pursuant to Section 138 of the Negotiable Instruments Act, the punishment for cheque bounce can be imprisonment for a term of a maximum of two years, a fine double the sum mentioned in the dishonoured cheque, or both.
5. Can a cheque bounce case be settled outside the court?
Yes, a cheque bounce being a compoundable crime allows one to have an amicable settlement at any stage without having to approach the court.
6. Do I need a lawyer to file a cheque bounce case?
Although you can represent yourself in court on your own, it is much better to have a lawyer by your side because of the serious consequences involved in filing the notice and the technical nature of criminal procedures in court.
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