Cheque Bounce Case

Cheque Bounce Case

What is Cheque Bounce?

When a cheque is returned by the bank unpaid, it is known to be dishonoured or bounced.

A cheque is dishonoured or bounced when it is presented for payment to a bank, but it is not paid due to some reason or the other. The few reasons as to why a cheque is generally bounced are: 

•    There is insufficient money in the issuer’s bank account.

•    The sign of issuer recorded in the bank and the sign on the cheque does not match.

•    The date stated on the cheque is disfigured or unreadable.

•    The cheque has expired. The validity of cheques in India is 3 months from the date stated on it.

•    The sum written on the cheque in words and numbers does not match.

•    The cheque has been damaged or torn.

•    There are few cheques overwriting or scrawling on the cheque.

•    The bank has a doubt of fraud or forgery relating to the cheque.

•    The account number towards which the cheque is drawn doesn’t match.

Cheque Bounce Case under Section 138

Due to the consequence of cheque bounce in India, a Cheque bounce case as per Section 138 of the Negotiable Instrument Act, 1881, makes an individual legally responsible for cheque bounce case, if the cheque issued through the individual is dishonoured because of insufficiency of money in the bank account or the sum stated in the issued cheque is above the sum to be paid in agreement with the bank.

Cheque bounce is considered to be criminal wrongdoing and any individual who is found guilty in a cheque bounce case shall be liable for punishment as stated in Section 138 for cheque bounce of the Negotiable Instruments Act.

Cheque Bounce Notice

This cheque bounce notice is given by the unpaid Creditor (Payee) towards the defaulting Debtor (Drawer) through an Advocate for the dishonour of Cheque under section 138 of Negotiable Instrument Act.

It is legal notice issued by the Advocate of the Payee specifying a 15 days’ time given towards the Drawer in fault to pay the due Cheque sum. It furthermore specifies that if the sum is not paid within 15 days from the receiving of the notice, the due Payee has the right to file a legal grievance and initiate legal action against the defaulting drawer.

Procedure for prosecution in a Cheque Bounce case:

The procedure for prosecution in a Cheque Bounce case is:

1. Firstly, after dishonour of cheque, a chance would be given to the drawer in a form of written notice towards immediately repay the cheque sum

2. Such notice would be sent within 30 days of receiving of ‘Cheque Return Memo’ from the banker of the Payee.

3. The notice period of 15 days would be specified in such notice sent towards the Drawer.

4. No offence is supposed to be committed by the Drawer if the Drawer pays off the complete sum within the said notice period of 15 days.

5. If not, the Payee might choose to file a complaint in the competent court against such defaulting Drawee.

6. Such complaint would be made within 1 month from the expiry of 15 days set in the notice.

Conditions essential to prosecute the defaulting Drawer:

The Drawer could be sued only in the following conditions:

1.    In case the cheque drawn by the Drawer is on the account maintained by or in the name of the Drawer himself.

2.    In case the cheque was dishonoured and returned owing to ‘Insufficient funds’ in the Drawer's account.

3.    In case the sum mentioned in the cheque is for the discharge of some debt or liability of the Drawer towards the Payee.

4.    In case the Drawer fails to make payment of the dishonoured cheque within 15 days from the date of receipt the written notice in this regard.

When all the above-mentioned conditions exist, the Drawer could be sued or prosecuted for dishonouring of the Cheque.

Who deals with Cheque Dishonour complaint/cases: (Judicial Body).

Cheque Bounce is overseen under section 138 of the Negotiable Instrument Act. Any wrongdoing against Cheque, as stated under section 138 of Negotiable Instrument Act, is a criminal offence and therefore the proceedings against such Cheque is dealt consistently with the Summary Trial provisions of Code of Criminal Procedure, 1973 (CrPC).

The wrongdoing concerning the Cheque bounce case is tried by Metropolitan Magistrate (in case of Metropolitan cities) or Judicial Magistrate of First Class (for other than Metropolitan cities). Accordingly, the complaint against the defaulting Drawer would be made accordingly.

Where could a Cheque Bounce case be filed?

According to the latest change made as per 2015 Ordinance and laws in force, the complaint of the dishonour of cheque is made at the place as mentioned below:

•    Where the Cheque is deposited through the Payee/Holder for collection of the sum through his bank account - the place where the branch of the bank is located in which the Payee/Holder holds and maintains the account.

•    Where the Cheque is deposited through Payee/Holder for collection of the sum otherwise through his bank account - the place where the branch of the Drawee bank is located where Drawer holds as well as maintains the account.

Who could file a cheque bounce case?

The case of the dishonour of cheque can be filed at a place where the cheque has been submitted for honouring, therefore, the Drawer is the one who could file a cheque bounce case. The case for the dishonour of cheque could be filed not only against the person but also against any association dishonouring the cheque.

Cheque Bounce Charges or Cheque Bounce Penalty?

Section 138 of the Negotiable Instrument Act deals with Cheque bounces punishment. Dishonouring of Cheque is criminal wrongdoing which is punished with penalty or imprisonment or both. The fiscal penalty for dishonouring of a cheque might be twice the sum of the cheque. If imprisonment is given to the drawer, it might extend to 2 years. Also, the bank has the right to stop the cheque book facility as well as close the account for repeated offences of bounced cheque.

Can an individual dishonouring the Cheque get bail in a cheque bounce case?

Dishonouring of Cheque is a bailable offence, where one could get bail if the complaint is made against him for dishonouring the cheque. However, in the case where after getting bail an individual fails to appear before the court after the receipt of the summons, the court could issue non-bailable warrant against that person, where the police could arrest him because of such summon issued.

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