With the increase in industrialisation, business transactions are widely being done with the payments through cheques. As the mode of payment through cheques rose, so did the number of cases reporting cheque dishonour and cheque bounce, which resulted in the need to criminalise the offence of cheque bouncing or dishonour. Hence, in the year 1988, criminalisation of the written cheques was introduced in the Negotiable Instruments Act, 1881.
What is Cheque Bounce ?
When the bank returns any cheques unpaid due to the insufficiency of the funds in the drawer’s account and for many other reasons, the cheque shall be called to be bounced. It is also called cheque dishonour, as it is a dishonour of payment by the drawer due to some reason.
It is the Drawer who issues the cheque, while the one in whose favour the cheque is issued is the Drawee.
What are the reasons for a Cheque Bounce ?
After a cheque is bounced, the respective issues a cheque return memo as well as the reason for the cheque bounce. Below mentioned are some of the reasons for the cheque bounce-
If the signature of the drawer does not match
If there is overwriting on the check.
If the cheque was presented after the validity of three months has expired.
If the account of the drawer has been closed.
If there are insufficient funds in the drawer’s account.
In case the payment from the said cheque has been stopped by the account holder himself.
Insufficient opening balance.
The words and figures mentioned in the cheque are not consistent.
If there is no seal of the company which has issued the cheque.
If the account number does not match.
In case the account is a joint account, then the signatures of both the account holders is necessary. The cheque gets bounced if only one signature is there.
If the drawer or the drawee has died.
In case the drawer has become insolvent, or has become insane.
If it is a crossed cheque.
In case the cheque issued is against the rules of the trust.
If some alterations could be noticed on the cheque.
If the drawee has presented the cheque at a wrong branch.
If the amount of the cheque has crossed the limit of the overdraft.
Remedies against cheque bounce-
Resubmission of the cheque- if the cheque gets dishonoured due to overwriting, mismatch of the signature, or the figures and words on the cheque, the drawer could be asked by the payee to submit another cheque so as to rectify the former mistake. In case the drawer disagrees to submit another cheque, the payee has the right to initiate civil action against the drawer to pay the cheque amount which was due to him.
Notice for cheque bounce under Section 138 of the negotiable Instruments Act- a notice for the cheque bounce is issued under Section 138 of the NIA, in case a cheque is bounced due to insufficiency of the funds. When the cheque gets bounced due to some other reason, the notice could not be issued and the payee will have to demand for another cheque.
After the notice for cheque bounce has been issued-
A notice could be issued within a period of 30 days after an intimation has been sent by the bank that the payment could not be made due to insufficient amount.
The payee must give the drawer a period of 15 days from the date of receiving the notice sent by him.
A legal action could be initiated within a period of 30 days after the expiry of 15 days notice period has ended.
Also, a notice cannot be issued if the cheque was issued as a donation or a gift or any such obligation which is not legally enforceable. The cheque must be issued to discharge a liability which is legally enforceable
Procedure to be followed-
A complaint is filed before the Magistrate of appropriate jurisdiction after expiry of the 15 days time period.
The payee/complainant is required to appear before the Magistrate and provide the details of the case. If the Magistrate is satisfied with the same, summons shall be issued to the drawer to appear before the court.
Afterwards the defendant is required to file his statement and arguments and evidence are produced in the court.
If the court deems the drawer guilty, it will issue a judgment of conviction for the crime of check bounce.
It has to be understood that it is not possible to file a 138 case if accused not received legal notice. It is mandatory for serving notice before taking any legal action in the case of cheque dishonour.
Conclusion
As could be inferred from the above article, whether you are the victim of a cheque bounce case or if you are defending yourself in a cheque bounce case, it is important to seek proper legal guidance from experienced cheque bounce lawyers who could help you drafting of legal notice as per the requirement of your case, for in case the drawer does not give a satisfactory reply to your notice and you decide to continue the case in the court, the notice se sent would be very helpful for your case.
If you wish to talk to a lawyer or seek free legal advice online for a cheque bounce case or any other legal issue related to a criminal or civil case, you may contact us at Lead India
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