Definition of Cheque bounce:
A cheque bounce means the bank didn’t honor the payment. There are various reasons for cheque bounces. For instance, a cheque may bounce because of overwriting on the cheque, damaged cheque, expired validity of cheque, wrong cheque, or mismatched figures are written on a cheque. These are minor issues and can be resolved without the intervention of the court. A major problem arises when a cheque bounces because of insufficient funds in the drawer’s account. Cheque bounce is regulated by section 138 of the Negotiable Instruments Act, 1881 (NI Act).
If you receive a cheque that has bounced you have two alternatives. Firstly, you can send the person notice and if no response comes, after 15 days you may send them a legal notice by filing a complaint in court.
Steps to file a complaint:
The primary step is to send a demand notice to the person who issued you a bounced cheque. The notice should contain details about the dishonored cheque. Details include the date of issue of cheque, copy of the dishonored memo, etc.
On receiving the notice, the person has 15 days to make payment to you. If they fail to make the payment, you can complain to the court. It is advisable to hire lawyers to help you in the process. Lawyers are well versed in the legal sphere and will make the process easier.
A complaint form, oath letter, copy of the notice served along with acknowledgment receipt, a photocopy of the memo, and the bounced cheque received need to be submitted.
Once the court receives the complaint, it will verify the documents. After verification, the complainant’s lawyer needs to fill the Bhatta or Process Form.
After filling the form, the person who sent you the bounced cheque is summoned by the court for a hearing. If that person doesn’t appear in court, the judge can issue a bailable warrant against the concerned person.
The person can also file a civil suit under Order XXXVII of the Code of Civil Procedure, 1908 to recover the due amount.
Documents to be submitted in cheque bounce case:
The complainant is required to submit an application form along with the following documents:
Copy of demand notice along with the receiver’s acknowledgment
The original cheque that has bounced
Bank return memo (bank’s communication stating that the cheque has been dishonored and the reasons for it)
Essentials of a Cheque Bounce Notice:
The cheque bounce notice should specifically mention the details such as cheque number, amount, date, name, and address of the branch of the bank where it has been drawn. All the necessary information must be specified in the notice. The amount for which the cheque was issued should be mentioned both in words and in number. In the cheque bounce notice it should be specifically stated that the cheque was issued in discharge of a legal obligation. It should also be stated that the cheque has bounced due to insufficiency of funds on the drawer’s account or the reasons stated by the bank while dishonouring the cheque. The amount demanded from the drawer should be specified in clear terms within 15 days. The date and place of issuance of notice should also be mentioned. The notice shall be sent under section 138 of the NI Act. The name and address of the drawer of the cheque must be mentioned. if the cheque has been issued in his personal capacity, then his name and address should be mentioned. if the person has issued the cheque as an authorized signatory of any organization, then his name with his designation should be mentioned. the organization will also be held liable to pay the amount and included as a party in the notice.
Place of filing Cheque Dishonour cases:
Cheque dishonor cases are filed before the Judicial Magistrate of First Class or Metropolitan Magistrate. The place of filing the complaint can be determined by various factors. The complaint can be filed at the place of the bank where the cheque was drawn, the place where the cheque was presented to the bank and it was dishonored by the bank, place of residence of the complainant, place of residence of the accused, place from where the notice was sent to the accused demanding the cheque amount.
Penalty in Cheque Bounce Cases:
Under section 138 of the NI Act issuing a bounced cheque is a criminal offense. Such a person can go to jail and may have to pay a huge amount of fines. The fine can extend up to 2 times the amount that had to be paid initially. If the court decides to put the person in jail it may be for one year but may be extended to two years. If the crime is heinous the person may be asked to pay a fine as well as undergo imprisonment.
Important things to keep in mind before filing a complaint:
It should be noted that a cheque expires after three months from the date of its issuance. The complaint has to be filed within the expiry of 15 days after sending the notice and no response is received from the drawer of the cheque. The failure to comply with the time restrictions may be excused by Metropolitan Magistrate in exceptional circumstances. Section 138 of the Act also covers the dishonor of cheques if the payment has been stopped by the drawer of the cheque. For section 138 to be applicable the cheque must be issued as a legal obligation. It means that cheques given as a gift, donation, or other non-legal obligation are not covered under this section.
Conclusion:
Cheque bounce cases are regulated under section 138 of the NI Act. It is one of the most recognized offenses in the business world The complainant should provide the required documents and provide a cheque bounce notice after the cheque has bounced. The complainant can file a civil suit or initiate a criminal suit against the issuer of the cheque. Thus, the person can choose any option to recover the due amount.
Get Free Legal Advice with Experienced Lawyers for your Cheque bounce cases with a simple sign-up with eStartIndia!
Author:
Leave a Comment
Previous Comments