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Understanding Cheque Bounce Notice

A cheque bounce notice is just a notification to the issuer that the recipient of the cheque will file a lawsuit if the money is not paid immediately. A cheque bounce situation occurs when money is not paid because there is insufficient balance in the account. Legal action will be taken if they don't retrieve the sum; swift action is required. First, the cheque bounce notice to the drawer is issued in writing requesting payment; if they don't make the payment, legal action will be taken. In the letter, a quick resolution is sometimes reached.

The Negotiable Instrument Act states that Cheque Bounce is a serious violation that carries a fine and/or imprisonment. To preserve his rights under the Negotiable Instrument Act, the drawer of the cheque must present the cheque within 30 days after the day it was dishonoured. A major infraction in India that carries a punishment or imprisonment is the bounce or non-payment of a cheque, as stated in Section 138 of the Negotiable Instruments Act.

What is a Cheque?

A Cheque is a bill of exchange that is due upon demand. The person in whose favour the cheque is issued is known as the drawee, while the person who issues the cheque is known as the drawer. Almost all transactions, including loan repayment, wage payment, bill payment, and fee payment, require cheques. Banks handle and clear many cheques on a daily basis. The purpose of issuing cheque is to get evidence of payment.

Nevertheless, for a lot of individuals, cheques are still a dependable form of payment. However, to prevent misuse, it is always a good idea to write crossed Account Payee Only cheques.

Things to be Considered for the Validity of Cheque Bounce Notice

The things to be considered for the validity of the Cheque bounce notice are mentioned below:

  • It needs to be in relation to the Negotiable Instruments Act Section 138.
  • Details about the presentation of the cheque.
  • An explanation for payment not being realized.
  • Details on the request for quick payment made to the cheque issuer.
  • Within 30 days after the cheque is returned to the issuer, a notice must be given.

Contents of Cheque Bounce Notice

The Cheque Bounce Notice must include the following contents:

  • The identity and mailing address of the cheque drawer.
  • The payee's name and address.
  • Details of the cheque that was sent to the bank for payment.
  • Information about the amount, date, and cheque number.
  • Date of cheque return.
  • The cause of the cheque's bounce.
  • Request for the sum to be paid to be arranged immediately.
  • Citation of Negotiable Instruments Act, Section 138.

When can a Cheque Bounce Notice be Issued?

Our experts will help you in drafting a Cheque bounce notice as per Section 138 of the Negotiable Instruments Act. After the drafting is finished, it must be printed on plain paper or on the company's letterhead before being sent to the person who issued the cheque. The following must be included in the cheque bounce notice:

  • The beneficiary's name on the cheque.
  • The issuer of the cheque's name and address.
  • The date on which the cheque was due.
  • Explanations for the cheque's return.

The Cheque bounce notice must be issued in accordance with Section 138 of the Negotiable Instruments Act.

How to Send the Cheque Bounce Notice?

Using our site, you may draft and send a cheque bounce notice. After the drafting is finished, it must be printed on plain paper or on the company's letterhead before being sent to the person who issued the cheque. The following must be included in the cheque bounce legal notice format:

  • The name of the cheque beneficiary.
  • The issuer of the cheque's name and address.
  • The date the cheque is due back.
  • Explanations for the cheque's return.

The Cheque issuer requested quick alternate payment and confirmation that it was issued in accordance with Section 138 of the Negotiable Instrument Act.

Why and When Cheque Bounce Notice is Issued?

The cheque notice is issued under Section 138 in the following circumstances:

  • The first requirement is that the cheque be made payable to the obligation.
  • The beneficiary must present the cheque within six months of its validity.
  • The bank has to have returned the cheque since there wasn't enough money.
  • The payee raises demand by sending a written cheque bounce notification for the payment within 30 days after learning from the bank that there are not enough funds.
  • The drawer failed to pay the cheque amount within 15 days of receiving written notice that the cheque bounced.
  • Legal action is started within a month following the cause of action's emergence.

How to Initiate Legal Action in the Case of Cheque Bounce?

Legal actions can be initiated in the cheque bounce case by following this process:

  • Within 30 days of the cheque being dishonoured, the beneficiary of the cheque sends the defaulter a bounce notification by registered mail. The information on the transactional nature, the amount involved, the date the cheque was deposited with the bank, the date of cheque bounce, the reason why the cheque bounced, and the beneficiary's request for payment within 15 days must all be included in the appropriately formatted notice of cheque bounce.
  • In the event that the issuer of the cheque defaults on payment, the payee may bring a criminal lawsuit in court within 30 days following the notification within a notice period of 15 days.
  • The court in the city where the cheque was presented is where complaints about cheque
  • Bounces must be lodged.
  • A hearing will be held, and a summons will be sent out in accordance with Section 138 of the Negotiable Instruments Act after the matter is accepted by the court.
  • The person who failed to pay the cheque amount would need to come before the court to have the situation resolved.

What is the Procedure for Cheque Bouncing?

The procedure for cheque bouncing is mentioned below:

  • A demand notice must be sent within 30 days following the event. The drawer has fifteen days from the date of receipt of the demand notice to pay.
  • To provide documentation of the notification's delivery, the said notice is issued by registered mail.
  • If payment is not received within 15 days, the payee has 30 days to file a complaint with a magistrate.
  • The state in which the bank is located is where a complaint must be lodged.

Punishment and Penalty

Upon receipt of the complaint, an affidavit, and pertinent documentation, the court will convene to hear the case and issue a summons. If proven guilty, the defaulter may face imprisonment for a term that may be extended to two years, a monetary penalty equal to double the amount of the cheque, or both. If there are repeated instances of bounced cheques, the bank also has the authority to terminate the chequebook service and cancel the account.

The drawer does not commit an offence if they pay the amount on the cheque within 15 days after receiving the notice. If not, the payee has one month from the day the notice's 15-day deadline expires to file a complaint in the jurisdictional magistrate's court.

Section 138 Of The Negotiable Instruments Act

As per Section 138 of the Negotiable Instruments Act, bouncing a cheque due to insufficient money is considered an offence under Section 138 and is subject to jail. Therefore, Cheque bounce is a criminal offence. It states that if someone writes a cheque on an account they own to pay someone else and the bank returns the cheque unpaid because there aren't enough funds to cover the cheque, the person who wrote the cheque has committed an offence.

In order to release themselves from any legally binding obligation or duty, they must draw the cheque. The amount of money to the credit of the drawer's account is either insufficient or more than the amount designated to be paid from the drawer's account by a bank agreement. Thus, the bank must return the cheque.

For the crime of checking the due course of the cheque that bounces, the drawer faces up to two years of imprisonment, a fine equal to double the value of the cheque, or both.

Section 144 Of The Negotiable Instruments Act

In accordance with Section 144 of the Negotiable Instruments Act, any individual in control of the firm's operations at the time the offence was committed is liable for any cheque that bounces. This includes cheques that the company issues. According to this provision, it is illegal for a company's cheque drawer to bounce due to inadequate cash.

When a firm is the drawer of a bad cheque, then everyone in authority and accountable for managing the company's operations is also guilty of the crime of cheque bounce and may face appropriate penalties.

When a company commits a cheque bounce offence, and it can be demonstrated that the director, secretary, manager, or other officers of the company approved the act, were negligent, or did it out of convenience, those individuals will be found guilty and subject to the appropriate punishment.

Cheque Bounce Rule

In early August 2021, the Reserve Bank of India (RBI) published a notification stating that clients who want to utilize cheques or whose financial operations substantially rely on them would need to maintain a minimum bank balance. The cheque will bounce if the minimum balance is not kept up to date. Furthermore, there's a chance the client who wrote the cheque may also be required to pay a penalty. The RBI also declared that the National Automated Clearing House (NACH) will be open twenty-four hours a day in addition to these modifications.

All private and national banks are affected by these changes. The purpose of the regulation modification was to facilitate a speedier and more seamless cheque-clearance process. The institution will be able to process and clear cheques on Sundays as well since the new rule guarantees that NACH will be open every day of the week.

Circumstances of Cheque Bounce

Cheque bounces can occur in the following different situations:

Insufficient Account Balance: The cheque will be rejected by the bank and returned back to the payee along with a cheque return memo explaining that there are not enough funds in the drawer's account to cover the cheque amount.

Cheque Expiration Date: The cheque must be submitted for clearance within a time span of three months when the drawer has issued it. If the cheque is not submitted to the bank within three months, it expires. The cheque bounces if it is delivered to the bank after it has expired.

Overwriting: A cheque that has been overwritten with the drawer's signature, the cheque amount, or any other statement bounces due to overwriting.

Damaged Cheque: A cheque will bounce if it is distorted, damaged, or has markings on it that make the details invisible.

Signature Mismatch: The cheque will bounce if the drawer's signature is illegible, missing, or different from the one on file with the bank.

Inconsistency Between Numbers or Amounts: If the amount on the cheque is different between what is written on it and what it actually is, it will bounce.

Remedies Against Cheque Bounce

Resubmission of Cheque

The payee may request that the drawer provide another cheque to correct the error if the cheque is bounced because of overwriting, a mismatched signature, a discrepancy between the amount written on the cheque and its numbers, or damage to the cheque. The payee may file a civil lawsuit against the drawer to recover the money owed to him rather than having the cheque bounce if the drawer refuses to give another cheque.

Cheque Bounce Notice

When a cheque bounces because there isn't enough money in the drawer's account to pay the cheque amount, Section 138 of the Negotiable Instruments Act is applied. The payee may require that the cheque be resubmitted if the cheque bounces for any reason other than inadequate money. In such a case, no notice of the receipt of the cheque bounce will be delivered to the cheque issuer. Otherwise, if the cheque bounced due to insufficiency of funds, the payee may recover money by giving a notice of cheque bounce.

Papers Required for Cheque Bounce Notice Format

A legal notice can be drafted and executed without the need for any particular paperwork. When creating a legal notice, however, it is necessary to take into account the papers received by the banks, such as the letter of return and cheques. In order to ensure that the legal notice has accurate information, any further documents related to the transaction that preceded the cheque bounce notice must also be reviewed.

Procedure for Cheque Bounce Suit

A cheque bounce suit goes through the following steps:

  • Submitting a complaint to the magistrate within a 15-day notice period after the drawer receives notification of a bouncing of the cheque.
  • The payee/complainant is required to appear in court and present the specifics of the matter.
  • The complainant's statement will be considered by the magistrate, who will then summon the drawer to appear in court.
  • The drawer will show up and either confirm or refute the complainant's facts. The court will move forward with the criminal trial of the matter if the drawer rejects the complaint.
  • The statement will filed by the drawer/accused, and the court will hear arguments and evidence from both sides.
  • The court will issue a judgment of imprisonment against the drawer or accussed for the offence of cheque bounce or cheque non-payment if it determines that the drawer committed the crime.

How to Respond to a Cheque Bounce Case

To stop future legal actions, you should respond to the legal notice for your defence or pay the required amount by cheque. Nevertheless, you should speak with a lawyer who specializes in cheque bounce before responding. The issue will be settled if you pay the amount pending.

There is no set format for responding to the legal notification; however, you should make sure to include the following things:

  • The cheque bounce notice is sent to the drawee's attorney in response
  • Name, address, and description of yourself.
  • Issue specifics: issue date, note about cheque return, etc.
  • Reply to the accusations made against you.

Why Corpbiz

A legal notice must be submitted on behalf of the party by its attorney or advocate. Therefore, in order to deliver a cheque bounce notice in writing, you must first connect with an experienced advocate at Corpbiz. Hiring a cheque bounce lawyer is strongly advised since a cheque bounce notice is an initial step towards starting a litigation process. Such legal notices can be drafted with the necessary knowledge and competence that the Corpbiz team entails. Our experts will be able to compile crucial data for you and send proper notice, making sure you are headed in the right direction when pursuing justice. All legal documents may be efficiently managed by our team.

Frequently Asked Questions

The day the cheque bounced must be followed by 30 days for the sending of a legal notification. After that, the case needs to be filed within 15+30=45 days of the legal notice being sent.

A cheque bounce notice is just a notification to the issuer that the recipient of the cheque will file a lawsuit if the money is not paid immediately.

Therefore, you need to respond to the notice regarding the cheque bounce case that you received from the cheque receiver and speak with an attorney who handles these types of issues. A reply must be submitted no later than thirty days after the notice is received.

If the matter is tried in court, the verdict might not be implemented for two to five years. In Indian law, there is a clear legal path for situations of cheque bounce (under the Negotiable Instruments Act).

Section 138 of the Negotiable Instruments Act imposes a maximum sentence of two years, making it a bailable offence.

You will require the help of a lawyer or legal services provider, like Corpbiz, to register a complaint. They can assist you with the complaint's drafting and act as your advocate in court. The complaint must contain information concerning the legal actions to be taken in response to a bounced cheque, including the date, amount, and cause of the bounce.

The notice under Section 138 to the defaulting drawer may only be sent by the payee. Nonetheless, the payee may use a lawyer or legal service provider to issue the notice as per Section 138 of the Negotiable Instruments Act.

Generally, if there isn't enough money in your account, a bank could try to deposit the cheque two or three times. It is not guaranteed that a cheque will be resubmitted at all, and there are no restrictions on the maximum number of times it may be done so.

Therefore, if you are making your instalment payments on the due date, your credit score remains unchanged even if a cheque you have written bounces. However, your CIBIL score will suffer if you miss payments, make late payments, or write a dishonoured cheque.

Section 138 of the Act would not apply if the defendant could demonstrate that there was sufficient money to cash the cheque but that other circumstances led to the payment being stopped.

The name of the cheque beneficiary, the name and address of the cheque issuer, the date the cheque was returned, the reason it was returned, a request to arrange for an alternate payment immediately, and the statement that the notice is being sent in accordance with Section 138 of the Negotiable Instrument Act must all be included in the cheque bounce notice.

Cheques that don't match account numbers are occasionally returned. Cheques that are damaged or defaced may also not be honoured by the bank and are known as cheque dishonoured. If a cheque is returned unpaid due to the reason of lack of sufficient funds in the account of the drawer, then this is known as a cheque bounce.

Within two working days, you might be able to retrieve the whole amount of the cheque, depending on its amount. A part of the cheque may be available right away or within one working day in some banks.

The NI Act states that a cheque's validity is limited to three months from the day it is issued. On the other hand, one must file the lawsuit within the allotted period if the cheque bounces.

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