Cheque Bounce, fraud

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What is Cheque Bounce/Dishonour of Cheque

A cheque is said to be dishonoured or bounced when it is presented for payment to a bank but it is not paid or cleared or get bounced, due to various resons. There could be insufficient funds, no funds in the Bank Account. Signatures not matching or there is an overwriting in the cheque. In India, cheque bounce is considered a legal offence and the law regulating the offence is section 138 of the Negotiable Instrument Act, 1881. After a recent amendment being made, 20% amount needs to be paid within the stipulated time given by the court, after which rest of the amount should also be cleared.

Reasons for Cheque Bounce, return, not paid :

A cheque is said to be dishonoured or bounced when it is presented for payment to a bank but it is not paid because of some reason or the other. The following are some of the reasons why a cheque is generally bounced :

Signature is not matching

There is overwriting in the cheque

Cheque was presented after lapse of three months, i.e. after the cheque has expired

Account was closed

Disfigured or Damaged cheque- a cheque will be dishonoured if it is torn, damaged or not in a good condition or has some details not clearly visible

– Insufficient funds in the account

– Payment stopped by the account holder

– Opening balance insufficient

– Disparity in the words and figures mentioned on the cheque

– In case the cheque is issued by a company, the same does not bear the seal of the company

– Mismatch in account number

– In case of joint account where both signatures are required, only one sign is there

– Death of the customer

– Insolvency of the customer

– Insanity of the customer

– Crossed cheque

– When a cheque is issued against the rules of trust

– Alteration in cheque

– Doubt in genuineness of the cheque

– Presented at the wrong branch

– Crossing limit of overdraft (OD)

Cheque Return Memo

After the cheque is dishonoured, the bank offers ‘cheque return memo’ to payee stating why the cheque has been bounced. The cheque can be resubmitted by the payee if he believes that it will be honoured the second time. If the cheque is bounced again, then the payee can prosecute the drawer legally.

Legal Remedies available in a Cheque Bounce case?

SEND A LEGAL NOTICE/ DEMAND LETTER TO THE DRAWER

Before filing a suit against the drawer, a legal notice/demand letter 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 dishonoured.
You can take assistance from a lawyer to draft the legal notice in such a case.

FILE A COMPLAINT IN THE COURT

If the drawer does not make the payment within 15 days from the date on which the notice has been sent to him, then the payee can initiate legal action against such person within 30 days from the date of expiry of the 15 days period provided to the drawer.

Essential Evidence ( Documents) Before you proceed for a Cheque Bounce Matter

It is critical for you to have the following documents when filing a complaint of cheque bounce:

1. Original cheque
2. Cheque returning memo
3. Copy of the legal notice sent to the drawer demanding the payment of money
4. Power of Attorney signed by the complainant
5. Preliminary evidence in shape of Affidavit

Timelines for reply to the Legal Notice

In case you receive a legal notice for payment of money in a cheque bounce case, then you have to send a reply to such notice within 15 days from the date on which the notice has been received. Along with the notice, you must also send a cheque in favour of the payee of the same amount as was the previous cheque. The reply must also specify the reason for the dishonour of cheque. If the reply is not made within the stipulated time period then a legal action will be initiated against you.

However, if you do not have an outstanding debt against the person who has sent the notice, then you should mention the same in your reply to the notice, which is to be sent within 15 days.
You can always take assistance of a lawyer

FAQ

1. What is the punishment in a cheque bounce case?

The maximum punishment that can be awarded to the accused in a cheque bounce case is 3 years of imprisonment along with fine that can extend upto double the cheque amount.

2. How long after the notice has been served can I file a case against the drawer?

A case under section 138 of the Negotiable Instrument Act, 1881 can be filed within 30 days from the date of expiry of 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 served.

3. What can I do if the time for filing a case under section 138 expires?

If the time for filing a case under section 138 is expired, then another remedy available in such a case is to file a summary suit for recovery of money or initiate criminal proceedings under section 420 of IPC against the drawer within 3 years from the date on which the cheque is issued.

4. What is a summary suit for recovery of money?

Summary suit is a civil legal proceeding initiated for recovery of money due under any written agreement, cheque etc. These proceedings are different from normal recovery suit, as here the liability to prove that petitioner is not liable to recover any amount is on defendant for which he needs to obtain leave to defend from the court.

5. What can I do in case I do not know the drawer’s address?

You need to know to address of the drawer for serving legal notice to him, in case you do not have any information regarding his current address then you can serve the legal notice to the last known address.

6. What is the average time in which a cheque bounce case is resolved?

The average time for resolution of a cheque bounce case depends on the district court you are filing your case before. The case load and infrastructure a court has, are factors to consider. A cheque bounce case will realistically take you anywhere from 1 to 2.5 years to conclude.

7. Which court should I approach for filing a cheque bounce case?

According to the Negotiable Instrument (Amendment) Act, 2015, a cheque bounce case can be filed in a court within whose local limit of jurisdiction is the bank to which the cheque is presented is situated.

8. Can I recover interest and legal expenses from the drawer of the dishonoured cheque?

Yes, you can recover interest and legal expenses from the drawer of the dishonoured cheque in a summary suit for recovery of money, but not in the proceedings initiated under Section 138 N.I. Act. However, under Section 138 N.I. Act the award may be higher than the cheque amount. The apparent intention is to ensure that not only the offender is punished, but also ensure that the complainant invariably receives the amount of the cheque by way of compensation under section 357(1)(b) of the Code. Though a complaint under section 138 of the Act is in regard to criminal liability for the offence of dishonouring the cheque and not for the recovery of the cheque amount, (which strictly speaking, has to be enforced by a civil suit), in practice once the criminal complaint is lodged under section 138 of the Act, a civil suit is seldom filed to recover the amount of the cheque, alongwith interest.