Notice for cheque bounce

Cheque bounce is an offense in India punishable under section 138 of the negotiable instrument act. In case of cheque bounce, a cheque beneficiary must present the cheque issuer with a check bounce notice within 30days of return of the cheque. A cheque bounce notice must contain all information about the cheque bounce with the reference of section 138 of the negotiable instrument act.

A cheque bounce notice must be presented to the cheque issuer within 30days of return of cheque due to be valid.

When a cheque is dishonored, the bank offers ‘cheque return memo’ to payee stating why the cheque has been bounced. The payee can prosecute the issuer of the cheque legally.

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Grounds for the dishonor of cheque:-

1. Insufficient funds in the account.

2. Account closed

3. ‘Stop payment’ instructions.

4. If bank on which the cheque is drawn is not a clearing member of - the Reserve bank of India.

5. Unmatched signature on the cheque.

6. If the cheque is Disfigured or Damaged

7. If there is a difference in the amount in words and number.

Ingredients of an offense under section 138:-

(1) The cheque should have been issued for the discharge, in whole or part, of any debt.

(2) The cheque should have been presented within a period of 6 months or within its validity period whichever is earlier.

(3)The payee or holder in due course should have issued a notice in writing to the drawer within thirty (30) days of the receipt of information by him from the Bank for the return the cheque as unpaid.

 (4) After receipt of the said notice from the holder in due course, the drawer should have failed to pay the cheque within fifteen (15) days of receipt of the said notice.

Legal Remedies are available under section 138(Negotiable instrument act):-

Before filing a suit against the drawer, a legal notice must be sent to him. The notice must be sent within 30 days from the date on which the bank returns the cheque along with the information that the cheque is dishonored.

You can also take assistance from our expert team of lawyers to draft the legal notice in such a case.

If the drawer does not make the payment within 15 days period from which the notice has been served to the drawer, i.e. 45 days from the date on which notice has been sent. Then the payee can take legal action against such a person.

Documents required for sending legal cheque bounce notice:-

1. The original cheque.

2. Cheque return memo issued by the bank.

3. A copy of the legal notice to be sent to the drawer of the cheque asking for the payment of money.

4. Power of Attorney signed by the payee.

5. An affidavit containing the preliminary evidence.

Recent amendments in the Negotiable Instrument act, 2018:-

The insertion of new provisions in the Negotiable Instrument Act aims at addressing the issue of undue delay in payments of cheque dishonor cases.

The Amendment incorporates Section 143A and Section 148 in the Negotiable Instrument Act.

143A:- The new Section 143A empowers the Court trying an offense under Section 138 of the NI Act (cheque bounce cases) to order the drawer of the cheque to pay twenty percent (Interim compensation) of the amount of the impugned cheque. Earlier, there was no such relief for the payee.

148:- The new Section 148, whereby in an appeal by the drawer against conviction under Section 138 of the NI Act, the Appellate Court may order the appellant to deposit a minimum twenty percent of the total amount as fine or compensation awarded by the trial Court. However, if the appellant is acquitted, then the Court shall direct the complainant to repay to the appellant the amount so released, with interest.

Author:

eStartIndia Team