CHEQUE DISHONOURED OR BOUNCE CHEQUE

PARTICIPANTS IN THE CHEQUE:

1. Drawer: Also known as the "author of the cheque," the Drawee is the one who issues the cheque. (The debtor may be the drawer.)

2. Payee: A payee is a party on whose behalf a check is made and to whom the sum stated on the cheque is due. (The Payee may also be the Creditor.)

3. Drawee: The bank from which the amount of the cheque must be paid, or the bank that has been given the order to do so, is referred to as the drawee.

4. Payee's Bank: The financial institution where the Payee has a bank account where the cheque money is to be deposited/credited (particularly in the event of crossed cheques) or the bank where the Payee deposits the cheque is referred to as the 'Payee's Banker.'

WHAT DOES "CHEQUE BOUNCE" OR "DISHONOURED CHEQUE" MEAN?

The subsequent series of events adds up to a cheque bounce or cheque dishonour:

• A Drawer writes a cheque in the Payee's name because they owe that person money.

• The Payee/Holder of the Cheque deposits the Cheque at the bank where he has an account or in another location. The Cheque must be placed on or after the date given on the Cheque, but not more than 30 days later, otherwise, it will become void.

• If the Drawee is unable to pay off the amount mentioned in the Cheque after depositing it in the account, it sends the 'Cheque Return Memo' to the Payee's banker. The Payee's banker then sends him a 'Cheque Return Memo' telling him that the cheque has been dishonoured.

Thus, dishonour of cheque refers to the Drawer's inability to pay off the Cheque amount to the Payee on the due date or when submitted/deposited.

HOW DID YOU FIND OUT THE CHEQUE HAD BOUNCED?

If the Drawee Bank learns that it will be unable to pay the Payee's bank the full amount of the Cheque for whatever cause, the Drawee Bank will send a "Cheque Return Memo" to the Payee's banker as soon as feasible. The dishonoured cheques and memos are then given to the Payee by the Payee's banker.

REASONS FOR A CHEQUE BOUNCE:

There are several reasons for a cheque to bounce, but one is covered by Section 138 of the Negotiable Instruments Act.

When a cheque is presented to a bank for payment but is not accepted for any reason, it is referred to as being dishonoured or having bounced. Some of the causes of actual cheque bounces include the following:

•  The signatures do not match.

•  The cheque has been overwritten.

• The cheque was presented three months after the cheque had expired.

• The account was closed.

• There is insufficient money in the account.

• Payment has been halted by the account holder.

• Inadequate opening balance

• The disparity between the text and figures on the cheque

• If the cheque is signed by a firm, it doesn't contain the business's seal

• Account number mismatch

• In the event of a joint account, both signatures are required.

• The customer's death

• The customer's insolvency

•  The customer's insanity

• Cheque crossed

• Whenever a cheque is provided in violation of the rules of the trust

• Cheque modification

• Concerns about the authenticity of the cheque

•  Presented at the incorrect branch

• Overdraft limit exceeded (OD)

RESUBMITTING A DISHONOURED CHEQUE:

If the payee or the person who holds the cheque thinks that the cheque will be honoured again after being dishonoured the first time, he may do so within 3 (three) months after the date of the first submission.

The payee has the legal right to file a complaint and pursue legal action against the drawer even in that case, should the drawer fail to make payments and the cheque be discovered to be dishonoured.

PROSECUTION PROCEDURE IN THE EVENT OF A CHEQUE BOUNCE:

The following describes the legal process for prosecuting cheque fraud:

• First, once a cheque is dishonoured, the drawer is given the opportunity to refund the cheque amount promptly in the form of written notification. This Notice is available on our website, LegalDocs.co.in.

• Such Notice should be delivered within 30 days after receipt of a 'Cheque Return Memo' from the Payee's Banks.

• A 15-day notice period shall be indicated in any notification given to the Drawer.

• If the Drawer pays up the entire amount within the specified notification period of 15 days, no offence is assumed to have been committed by the Drawer.

• If otherwise, the Payee may opt to file a formal complaint against the defaulting Drawee in the appropriate court.

• Such a complaint must be filed within one month of the notice's expiration date.

CONDITIONS FOR PROSECUTING THE DEFAULTING DRAWER:

The Drawer can only be sued under the following circumstances:

• If the account being used to deposit the Drawer's cheque is one he or she maintains or is named on.

• If the cheque was returned because there wasn't enough money in the drawer's account, it was dishonoured.

• If the amount on the cheques is for the payment of a debt or liability owed by the Drawer to the Payee.

• If the Drawer does not pay the returned cheque within 15 days of receiving written notification in this respect, the check will be considered dishonoured.

• Only if all of the aforementioned requirements are met may the Drawer be sued or punished for Cheque dishonour.

WHO HANDLES CHEQUE DISHONOUR COMPLAINTS/CASES: 

Cheque Bounce is controlled by Section 138 of the Negotiable Instruments Act. Any offence against a cheque, as defined in Section 138 of the Negotiable Instruments Act, is a criminal offence, and the procedures against such a cheque are handled in conformity with the Summary Trial provisions of the Code of Criminal Procedure, 1973. (CrPC).

In metropolitan cities, the Metropolitan Magistrate or Judicial Magistrate of First Class will preside over the trial for the offence involving the check (for other than Metropolitan cities). As a result, a report against the defaulted Drawer must be filed.

WHERE CAN I SUBMIT A CHEQUE BOUNCE CASE?

According to the most recent amendment made in accordance with the 2015 Ordinance and legislation in effect, a complaint of cheque dishonour is filed at the following location:

• If the Payee/Holder deposits a check for the purpose of having the money collected through his bank account, the location of the bank branch where the Payee/Holder keeps and manages the account.

• The location of the Drawee bank branch where the Drawer retains and maintains the account, in the event that the Payee/Holder deposits the check there for the collection of the money rather than through his bank account.

WHO MAY FILE A LAWSUIT FOR A BOUNCED CHEQUE?

The complaint or case of a dishonoured check is brought up at the location where the check was brought up for payment; as a result, the Drawer is the one who brings up a case of a bounced check. A complaint for cheque dishonour can be launched not only against the individual but also against any institution that has dishonoured the cheque.

CHARGES FOR CHEQUE BOUNCE OR PENALTY FOR CHEQUE BOUNCE:

Cheque bounce penalties are addressed under Section 138 of the Negotiable Instruments Act. Cheque dishonour is a felony act punishable by a fine, imprisonment, or both. The liquidated damages clause for cheque dishonour might be double the value of the cheque. If the drawer is imprisoned, the sentence may be increased to two years. Furthermore, the bank has the power to suspend the cheque book capability and liquidate the account if the bounced cheques are repeated.

IF A COMPLAINT IS MADE, CAN SOMEONE WHO BOUNCES A CHEQUE RECEIVE BAIL?

Dishonour of a Cheque is a pardonable offence, which means that if a charge is filed against someone for dishonouring the Cheque, he might be released on bail. However, if an individual fails to appear in court after obtaining a summons (a letter asking a person to appear in court on the designated date) after receiving bail, the court may order a non-bailable order against you. The cops arrested you if such a warrant is issued.

THE HISTORY OF THE CHEQUE AND HOW IT AFFECTS TRADE AND COMMERCE

When Trade and Commerce flourished and finally established a firm foothold in people's daily lives, new types of Negotiable Instruments were developed over time to make money transfers more certain and convenient than previously. People used to verbally pledge to pay the owing money on a later date, but then back out of their verbal commitments to pay or stretch the date beyond and farther when the claimed due date arrived. As a result, the concept of a Negotiable Instrument was born. A negotiable instrument is a paper, not actual money, that carries a 'promise to pay a certain sum of money to the person carrying such a document. A cheque is one of the Negotiable Instruments that has become a highly trusted and widely utilised means of payment as the Banking Sector has developed over time. But, as they say, "everything has its advantages and disadvantages," and Cheque was not spared!

As the process moves forward, the bearer of the check deposits the check in the financial institution on or after the date indicated on the check (but no longer than 30 days from that date), and after a few formal days, the authorized bank account of the owner of the check is credited with the sum indicated on the check. However, dishonouring cheques for various reasons became a chronic problem over time, and the 'CONs' of cheques grew more prominent. Cheques began to lose credibility as a result of this.

Previously, the violating conduct in relation to the dishonoured cheque was tried in Civil Court. The lawmakers deemed it vital to shield honest drawers from undue persecution.

However, it proved to be a time-consuming operation, defeating the aim of the cheque as a "quick instrument of commerce." As a result, Section 138 and a few other pertinent parts of the Negotiable Instruments Act, 1988, controlling 'Cheque,' were altered in order to expedite the resolution of instances involving cheque dishonour. Even the penalty for cheque dishonour, which was formerly one year, was increased to two years. The goal of these revisions was to increase the use of cheques and strengthen their reliability so that day-to-day trade and commerce transactions are secure.

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Author:

Dhvani Kamra
Noida
L.L.B. from Amity Law School, Noida