A cheque is made by a person out of their legal needs or assures to pay the amount to another person within the desired time. It is used in various transactions such as loan refunds, daily expenses, wages, house purchasing, rent, and many more.
The cheque must be said that it is an account payee cheque, which cannot be navigable by anyone other than the payee. Understanding the proper order of its issuance is essential to make it negotiable. According to legal terms, the one who writes the cheque is known as the payer or Drawer, and the one whose favor the cheque is made is known as the Drawee and payee.
The NI Act 1881 is suitable for cases of bouncing cheques. Many changes have been made in this act. Under Section 138 of the NI Act, the bouncing of a cheque is punishable by a fine and imprisonment of two years. If the drawee chooses to move legally, then the drawer must be able to pay that amount again. Such legal notice must be given in the written form.
In this article, we will look into the steps in detail. We will also discuss the steps that can help you avoid cheque bounce and the legal remedies for cheque bounce.
Cheque Bounce: Introduction
Cheques are one of the most common uses of exchanges we use in our day-to-day life. Over the past decade, cheque usage has kept increasing. The more its usage becomes, the more it increases the risk of bouncing. Yet, a cheque bounce is contrary to a lawful trade between two people, and the person whose cheque bounces is liable for a penalty under the law. Section 138-142 of the NI Act 1881 works with the cheque bounce crises and specifies proper penalties.
Grounds for cheque bounce in India:
Listed below are some grounds that can make the cheque bounce:
- Inadequate Account balance of the one who initiates the cheque.
- The signature of the one who initiates the cheque is vague or mismatched.
- The account number of the drawer is not visible or blurred out.
- Overwriting in the cheque: name, account number, and signature that can make a cheque bounce.
- If the account that the drawer initiated doesn't exist
- If the cheque is expired, that means giving a cheque after three months, counting from its issue date.
- Wrong Account Number, entering the wrong account can bounce the cheque.
- The difference in the amount written in words and numbers/digits.
- Mismatched the signature.
- When the drawer of the cheque shows idiocy or turns bankrupt, the cheque gets bounced
- When the limit of bank overdraft amount, which is the maximum leave limit, is surpassed, it will result in the bouncing of the cheque
- When the holder of the account stops the payment.
Cheque Bounce Case: Time limit
The reason why a cheque is bounced plays an important role in this part. Once the bank bounces a cheque, a memo describing the cheque bounce ground will be linked. After completing it, cheque-bounce protests must not be run, nor the cheque-bounce case way must begin.
First, notify the desired drawer of the cheque about bouncing. It is said to keep a minimum balance on the drawees.
Yet, if that is not the case, the drawee should give legal notice to the drawer stating the reason for the cheque bounce within 30 days of getting details from the bank for bouncing the cheque.
The legal notice of cheque bounce must include all the information about the payment needs and cheque bounce case section 138 as on NI act 1881 and 15 days. Between the 30 days of the expiry of this 15-day notice period, the payee can create the cheque bounce case system in India.
The essential tips on a time limit for cheque bounce in India include:
- Cheque bounce protest between 30 days of the expiry of the legal notice.
- Display of a cheque for encashment at the time of the validity period;
- Giving legal notice to the drawee for cheque bounce ground between 30 days of intimation of the financial institution.
- Payees are to eliminate the lack of funds in their account between the notice period of 15 days.
Cheque bounce: Types
A cheque can be bounced due to the following:
- Bouncing of cheques due to non-acceptance.
- Bouncing of cheques due to non-payment.
1. Bouncing due to Non-Acceptance of the cheque
A cheque is said to be bounced due to non-acceptance if the payee makes a non-acceptance of the cheque. The case is also made where the cheque is ignored and not accepted.
Note: The cheque can be said as bounced if the payee is incapable of acquiring and due to non-acceptance.
2. Bouncing due to Non-payment of the cheque.
A cheque is said to be bounced if the creator of the notice, the cheque's acceptor, or the check's payer makes any issue in pay. A cheque bouncing by non-acceptance can be only in the way of a cheque, but that of non-payment can be in the form of any negotiable instrument.
Cheque Bounce: Elements
Listed below are the vital elements of a check bounce in India:
- Bouncing of cheques due by the financial institution.
- Legal notice of bouncing is given to the drawee or payee requesting them to make the respected payment of the amount.
- Failure of the payer to pay the needed amount to the unpaid drawee course of the cheque between 30 days of getting the legal notice.
- Drawing of cheque by the one for the ground of any liability
- Indication of the cheque to a financial institution between six months starting from its drawing date or between its validity period (whichever comes first)
Cheque Bounce: Effects
If a check is bounced, the bank gives the drawee a cheque return memo saying the ground for bouncing the cheque. The drawee may select to re-submitting the cheque so that it gets marked the next time but must be wary of the effects of the next bounces as it will allow the drawee to charge the payer by not in all matters lawfully. The drawer can only be punished if the cheque is bounced out of liability/debt and not for any donation or gift to NGOs.
A case for the cheque bounce can be made directly by the drawee or a lawyer. The drawee can make the lawful work against the payer after presenting them the chance to reimburse the cheque instantly by giving a legal notice in written format. If the payment is not made within 30 days of getting the legal notice, lawful steps will be taken against them, as specified in Section 138 of the NI act 1881.
Bouncing the cheque can put penalties on both parties. The required person will be forced to pay the required late payment charges, which can be twice the cheque amount.
If the bounced cheque is against the repayment of any loans or debt except payment for donations and gifts, they can face imprisonment for two years.
Note: In some cases, a person can be penalized or imprisoned.
3. Stopping of Facilities
Due to the Bouncing of cheques, the respected financial institutions, that is, the bank of the payer, can access the bank account and even stop the cheque-book facility.
4. The issue with the Credit Score
The Bouncing of cheques can also deter the credit history of the payer, as the bank will prepare a note to the pay sections in the case of any bouncing cheque.
Cheque bounce: Process followed as on session 138 of the NI act 1881.
As per section 138 of the Negotiable Instrument Act 1881, the process includes the following:
- If the payer doesn't make the payment within 15 days of getting the legal notice, the drawee/payee can file an objection against the cheque drawer in the judge's court of skill.
- If the payee satisfies the court with the proof, the court calls upon the payer by giving a warrant.
- If the payer denies coming to the court, the respected court can issue a bailable warrant against the payer. If the charge doesn't come up in court even after giving a bailable contract, the court can issue a non-bailable contract to ensure the payer's reality.
- If the court finds them guilty, the court can defend them, and if they are not guilty, then the party is given a copy of the protest against them.
- After both of them, the payer or payee will have a round of cross-question in which the court will ask them questions to cross-check the proof.
- The court gives the order associated with pleading by any parties.
Crime by Companies/Organization:
If an organization defaults on the payment of the cheque and the cheque becomes bounced, the one who is liable for the organization's conduct by the cheque's issuance and the organization will be made guilty of that violation.
Faulty Cheque Bounce Cases in India:
Some business trades can start the payee by giving a cheque to the payer as a deposit. Yet, the payee may fraudulently deposit the cheque offered as security rather than ending the previous trade and setting a case of cheque bounce on the payer.
In this case, the payee should show and verify that the next cheque was given as security and no debts were there at that time.
Section 138 of the NI act 1881 works with the cases of Cheque Bounce in India, the cause for low balance in the account. The act states cheque bounce as a criminal offense that can penalize a person imprisonment of 2 years or a fine that can be twice the amount of the cheque, and both in some cases.
In f the drawee chooses to charge the drawer. It will allow the drawer to pay that amount with a written legal notice. One must give the legal notice to the drawer within 30 days of getting the cheque return memo. The legal notice must inform the time limit of 15 days, counting from the receipt date for repaying to the fund. If the issuer of the cheque denies or doesn't repay the amount within 30 days, the drawee can sue the drawer under the NI Act.
In the case of legal prosecution, in the case of cheque bouncing, should register the complaint within 30 days of the end of the notice period in a judge's court after conferring with an experienced lawyer.
Remedies of Cheque bounce:
Listed below are the best possible solution for the cheque
bounce in India:
Resubmission of the cheque
When a cheque fails to owe erasure, unmatched signatures, the difference in the amount written in numbers and words, a damaged cheque, or a stain in the essential information, the holder can ask the payer to resubmit the cheque. If the payee declines to get another cheque. Rather than a cheque bounce, the holder has the right to take legal action against the payer or file illegal orders against the payer to get the amount owed.
The Notice for cheque bounce:
According to section 138 of the act 1881, the holder must give
A cheque bounce is stated as per the 1881 NI act when a cheque
fails due to low funds in the payer's fund to pay the cheque-giving payments.
If a cheque gets bounced due to any ground except a low cash balance, no notice
is issued, and the payee must ask that the cheque be made again.
If the cheque is bounced, there are some remedies there that can be used.
When a cheque is bounced, the bank gives a Cheque Bounce Memo. In that case, they will get a chance to pay the cheque again within three months. Cheque Bounce memo papers say the causes for the non-payment of the fund stated in the cheque.
The following are the remedies:
As discussed above, bouncing cheques is a criminal offense under section 138 of the NI act 1881. It applies only to matters where the cheque bounces due to lack of amount and not because of any other technological default on the payer's part.
Sending legal notice to the payer is the Initial step toward the remedy. It must be done in the month of getting the cheque bounce memo. The legal notice gives the choice of making a payment within 15 days of getting that legal notice.
After completing the 15 days, if the payer fails to relent with his debt to do the payment, a criminal suit can be created by protest in the Court if by the Judicial Magistrate of First Class or the Metropolitan Magistrate. The complaint is to be accompanied by an affidavit. Reviewing the papers and ensuring the warrant will be given to the payer to arise in front of the Court.
The payer even has the chance to give his reason in the recap trial in front of the Court.
The Court then comes to the last conclusion after listening to both parties.
Generally, the civil case is filed for bouncing of the cheque to get back the amount. As per the High Court of Bombay, these request is maintainable in a court of law. If a criminal suit makes the defaulter be punished, it doesn't always come in saving the dues. Hence, two coexisting appeals can be maintained. Except for gifts or donations, these remedies are open to the victim in all uncertain debt or liability cases.
A person can file a case in the city or where the cheque is deposited. Before 1988, the bounce of cheques wasn't treated as a criminal offense. After that, it was made a criminal offense to end the recurring pattern of the bouncing cheque. It severely threatened trade, where the property transfer did not happen immediately.
Cheque Bounce Case: Punishment and Penalty
If the payer is seen guilty with the proof in front of the court, they are authorized to give a penalty of detention that can be more than a year but less than two or a fine exceeding Rs.5000/- or twice the cheque amount.
The party's bank has the right to close the bank account and even stop the checkbook and other facilities, as discussed under Section 138 of the NI act 1881.
The following steps must be kept in mind for getting the legal remedies:
A complaint of cheque bounce must be filed in 30 days, counting from the day of getting the legal notice, or within 30 days after the ending of 15 days, counting from the date when the legal notice was sent if no response is received from the payer of the Cheque.
The required court may excuse failure to comply with the timeframe of 30 days in exceptional cases.
The bounce of the Cheque is covered in section 138 of the NI act if the payer of the Cheque has stopped the payment of the Cheque.
If, after the receipt of the Cheque bounce legal notice, the payer of the Cheque asks the payee to pay the Cheque again, and if the Cheque gets bounced again, it does not open the timeline of the drawer as prescribed in the legal notice.
For the relevance of Section 138 of the NI Act, the Cheque should be issued as a legal duty. All the Cheque bounced cases are covered in this act except Cheque bounced that were given for donation or gift.
A cheque expires automatically after ending three months, counting from its issued date.
Things to keep in mind.
It is to be stated that these remedies are possible only if the pending debt or liability can be made. For example, the drawer cannot sue the drawee if the cheque which gets bounced was issued for a gift or donation.
It is important to keep a trace of the balance available in your bank account and keep the extra cash. If you find low money in your account, you can tell the drawee in paper and give a stop payment/cancellation at your financial institution or give funds into your account before the cheque date.
The legal security provided to the payee of bouncing or bouncing cheques according to Section 138 of the NI act 1881 and sections 406 and 420 of the IPC has made cheque payments one of the most secure modes of pay and trade in India. In this case, the payee can not only serve legal notice of cheque bounce to the debtor but also question them in a court of law for these bouncing.
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What are the documents needed to file a cheque bounce complaint?
Following are the documents needed to file a complaint for cheque bounce:
- The payee's bank gives an unpaid cheque slip.
- The written legal notice was sent to the payer.
- The reply to that legal notice. (if any)
- Legal Invoice
- The copy of the bounced cheque along with the actual one.
What is the punishment/penalty for bouncing the cheque?
Listed below are the penalties for cheque bouncing case:
- Detention that may exceed one year to a max of 2 years.
- The penalty of twice the cheque amount
In some cases, it can be both.
Is bouncing the cheque Compoundable?
The response is affirmative, as defaults like bouncing cheques can be settled out-of-court as per the NI act 1881.
In how much time should a complaint be filed for a cheque bounce complaint?
The written complaint for the cheque bounce must be filed within 30 days from its offense date. Yet, a revision in 2002 has eased the filing of complaints. According to this provision, if the case is filed delayed, a person must specify the reason for its delay.
How can a person fight for a cheque bounce case in India?
If any person files for a false cheque bounce case, the other one can file for a reply with the help of a lawyer in your nearby court. One can also file a counter case against that person who has filed a fake cheque bounce case.
What are the other remedies available for bouncing cheques in India?
Under section 138 of the Ni act, 1881, bouncing a cheque is a punishable offense:
With the detention of more than a year to a maximum of two years. Or a fine that can be twice the amount of the cheque. Or both in some cases.
How can a person get their amount from the cheque bounce case?
If the payer of the cheque isn't able to pay his liability other than the payment for the gifts and donations, they can be penalized under section 138 of the NI act 1881. The payee can file the case in the MM or the First Class Court of Judicial Magistrate
How Severe is a Cheque Bounce Case can be in India?
How harsh it can be or how many problems it can cause in a person's life depends on why the cheque is bounced. Section 138 of the NI act, 1881 states the penalty for bouncing a cheque due to low money in the account can be twice the cheque amount or imprisonment of two years. Yet, the respected cheque bounce complaint comes under compoundable and bailable crimes, which makes it a less serious financial crime.
All these penalties and punishments are discussed under section 138 of the NI act 1881.
How can a person avoid being stuck in a cheque-bounce offense?
Suppose it is a simple case of Section 138 per the NI Act. There is no way to avoid this situation, as the evidence is there in legal papers.
Yet, false cheque bounce cases may be trouble for an innocent person. In that case, cheque bounce lawyers may be of great help. Therefore, avoiding a cheque bounce case can be done by keeping the below-mentioned things in mind: Ensure checking the balance before creating a cheque. You must have that prescribed amount.
If a cheque bounce occurs due to any cheque bounce causes, fix that cause and correct it. If it is due to a lack of funds, ensure to fix that. Do not pay in cash. Rather the pay begins by cheque. If a cheque is bounced under section 138 starts, make a settlement and pay the needed amount as soon as possible. Never let a cheque bounce off a loan payment. Otherwise, it can put you in legal trouble. With that, late fees can also apply to non-payment or delayed payment.