Overview of Cheque Bounce Notice

Cheque Bounce notice is nothing but an intimation to the issuer that legal action will be taken by the cheque beneficiary in case of non-payment of cheque amount on an immediate basis.

Cheque bounce is a condition which arises due to the non-payment of the amount because of the lack of balance in the account. For the recovery of the amount, prompt action must be taken. Firstly a letter is sent to the drawer to make payment otherwise proceedings shall be initiated. Sometimes a prompt settlement is done on the letter. Cheque Bounce is a serious offense which is punishable by imprisonment and fine which is stated in the Negotiable Instrument Act. The drawer of the cheque should present the cheque within 30 days from the date of dishonoring of the cheque just to protect his rights as stated in the Negotiable Instrument Act. In India, as per Section 138 of the Negotiable Instruments Act, cheque bounce or cheque non-payment is a serious offense punishable with fine or imprisonment.

What is Cheque?

A Cheque is a “bill of exchange” payable on demand. The issuer of the cheque is known as ‘drawer’ whereas in whose favor the cheque is issued is known as ‘drawee’.

Cheques are used in almost all transactions such as re-payment of loan, payment of salary, bills, fees, etc. A vast majority of cheques are processed and cleared by banks on daily basis. Cheques are issued for the reason of securing proof of payment. Nevertheless, cheques remain a reliable method of payment for many people. On the other hand, it is always advisable to issue crossed “Account Payee Only” cheques in order to avoid its misuse.

Before serving notice to the maker of the cheque regarding the bouncing of the cheque the following information is required mandatorily

• Date when the cheque was drawn.
• Date of presentation of the cheque.
• Reason for non-realization of payment.

What are the Things Required to be considered for the Validity of Cheque Bounce Notice?

• It must be in reference to Section 138 of the Negotiable Instruments Act;
• Information regarding the cheque presentation,
• Reason for non-realization of payment and
• Information regarding the request made to the cheque issuer to make payment on an immediate
• A notice must be presented within 30 days of return of cheque to the cheque issuer.

When can Cheque bounce notice be issued?

• The cheque must be presented within 6 months from the date of its issue.
• The cheque must have been dis-honored due to non-sufficient fund.
• The maker of the cheque has not paid the amount within 15 days from the date of serving the notice regarding the bouncing of the cheque.
• The beneficiary has intimated the maker of the cheque within 30 days from the date of bouncing of the cheque.
• The cheque has been provided for settlement of any past liability.

How to Send Cheque Bounce Notice?

A Cheque bounce notice can be drafted through our platform. Once the drafting is completed, it is required to take a print on a plain paper or on the letterhead of the business thereafter it is delivered to the cheque issuer. Cheque bounce notice must contain the following

• Name of the cheque beneficiary,
• Name and address of the check issuer,
• The return date of the cheque,
• Reasons for cheque return,
• Request made to check issuer for immediate alternate payment and
• That it is issued as per the Section 138 of the Negotiable Instrument Act.

A cheque bounce notice is sent through the registered post for the purpose of recording issuing date of notice formally. Cheque beneficiary can retain one copy of the letter with himself whereas the other copy is delivered to the cheque issuer through registered post.

Why and When Cheque Bounce Notice is Issued?

• The first condition is that cheque must be towards the liability.
• Within a period of 6 months of validity of cheque, it should be presented by the beneficiary.
• Due to insufficient funds the bank must have returned the cheque.
• Within 30 days of the receipt of information from the bank regarding the insufficiency of funds, demand is raised by the payee by giving a written cheque bounce notice for the payment.
• Within 15 days of the receipt of the written notice of cheque bounce, drawer fails to make payment of the said amount.
• Within one month from the date cause-of-action arise, legal action is initiated.

How to Initiate Legal Action in case of Cheque Bounce?

• Cheque Beneficiary issues the Cheque bounce notice by the registered post to the defaulter within a period of 30 days of cheque dishonor. The cheque bounce notice must be in a proper format consisting information regarding the transactional nature, the amount involved, the date on which cheque deposited with a bank, cheque bounce date, the reason of cheque bounce, and beneficiary made the payment request within 15 days.
• Within 30 days from the expiry of the notice period of 15 days, the payee can file a criminal case in a court in case of cheque issuer made default in payment.
• Complaints regarding Cheque bounce must be filed in a court of such city where the cheque was presented.
• Once the case is admitted in the court, a hearing will be done and summons will be issued under Section 138 of the Negotiable Instruments Act.
• Cheque defaulter would have to appear before the Court for resolution of the matter.

What is the Procedure of Cheque Bouncing?

• Within the period of 30 days, demand notice is sent. On receiving demand notice, the drawer has to make payment within 15 days.
• The cheque bounce notice is sent by the registered post as to create the proof of the notice sent.
• In case of payment is not received within 15 days then payee can file a complaint before a magistrate within 30 days.
• A complaint has to be filed in such a state where the bank is situated.

Punishment and Penalty

On receiving the complaint, along with an affidavit and relevant paper trail, the court will issue summons and hear the matter. If found guilty, the defaulter can be punished with monetary penalty which may be twice the amount of the cheque or imprisonment for a term which may be extended to two years or both. The bank also has the right to stop the cheque book facility and close the account for repeat offences of bounced cheques.

If the drawer makes payment of the cheque amount within 15 days from the date of receipt of the notice, then drawer does not commit any offence. Otherwise, the payee may proceed to file a complaint in the court of the jurisdictional magistrate within one month from the date of expiry of 15 days prescribed in the notice.