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.
Cheque Bounce Notice
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.
Frequently Asked Questions
As per Negotiable Instruments Act, legal notice must be sent within 30 days from the date of cheque bounce. Thereafter within 15+30=45 days from the date of sending the legal notice, case must be filed.
A cheque bounce is a criminal offence stipulated under Section- 138 of the Negotiable Instruments Act, 1881. However, in case of a cheque bounce, the aggrieved party can file a criminal as well as a civil suit against the accused.
If the person files a false cheque bounce case against you in the court, you can file a reply to the case through a lawyer for cheque bounce case near you. You can also file a counter file of cheque against the person for filing a false cheque bounce case against you.
If the case goes to court the judgement may take anywhere around 2 to 5 years to take effect. The legal recourse for cheque bounce cases is straightforward in Indian Law [under the negotiable instruments act].
You will not need to get bail in a case under section 138 as it is predominantly a civil proceeding and not a criminal one though you may be liable to be imprisoned in case the matter is decided against you. However even so the offence is compoundable.
The offence under Section 138 of the Negotiable Instruments Act is a bailable one, since the same is punishable with imprisonment for a maximum period of two years.
In cheque bounce case you are required to issue notice within 15 days of the cheque bounce and thereafter after receiving the acknowledgment receipt with 30days we are required to file the complaint. After filling of the complaint it shall take 6 months (legally) for recovering the money back.
This Notice is a Notice which shall be given by the unpaid Creditor (Payee) to the defaulting Debtor (Drawer) through an Advocate in case of dishonour of Cheque under section 138 of Negotiable Instrument Act.
Yes, you can present the cheque again in the bank for payment, even if it was dishonoured on the first occasion. However, it goes without saying that the cheque can be presented again in the bank only during the period of its validity.
Bounced cheques do not adversely impact one's credit score. However, a missed EMI or credit card payment will affect the credit card score.
If you are absolutely sure you have no debt of any kind and that the complainant is misusing Section 138 NI Act - file a petition under 482 CRPC and get a lawyer to keep dragging the trial by all means necessary even by absconding to another city or state.
The cheque bounce notice must contain the name of the cheque beneficiary, check issuer name and address, date of return of cheque, reason for return of cheque, request to make arrangement for alternate payment immediate and the words that the notice is issued under Section 138 of the Negotiable Instrument Act.
The concept of cheque dishonoured & cheque bounce is nearly the same but there has only one difference is that cheque dishonoured due to irregular sign, wrong date etc, but cheque bounce occurred only due to insufficient funds. However, cases of cheque bounce are common these days sometimes cheques remain unpaid.
BANK customers who pay in cheques will soon be able to get money cleared within one working day - instead of up to six. Customers will see money in their account more quickly - and the cash will leave the issuer's account faster too.
According to the NI Act the valid of any cheque is only 3 months from the date of issue. However if the cheque is bounced, one needs to file the case within the stipulated time with is approximately 75 days from the date of dishonor of cheque.