Cheque bounce is a situation that arises due to the amount's non-payment because of the low balance in the bank account. For the recovery of the amount stated in the cheque, suitable action must be taken. First of all, a letter is sent to the drawer of the cheque to make a payment or else legal proceedings shall be instigated. On occasions, a settlement is done on the letter. Cheque Bounce is considered a serious offence that is punishable by fine and imprisonment, as per the provisions of the Negotiable Instrument Act, 1881. The cheque's drawer must present the cheque within 30 days from the date when the cheque was dishonoured just to protect his rights. In India, as per the provision of Section 138 of the Negotiable Instruments Act, cheque non-payment or cheque bounce is a grave offence punishable with imprisonment or fine.
What is Cheque?
A Cheque is a "bill of exchange" to be paid on demand. The cheque's issuer is acknowledged as 'drawer' whereas 'drawee' is the person in whose favour the cheque is issued.
Cheques are used in nearly all transactions such as payment of salary, bills, fees, re-payment of loan, etc. An immense majority of cheques are processed and cleared by banks every day. Cheques are drawn for the reason of securing payment proof. However, cheques continue to be a trustworthy method of payment for many citizens. Then again, it is always prudent to issue crossed "Account Payee Only" cheques to evade its misuse.
Prior to serving notice to the drawer of the cheque about the bouncing of the cheque the following details are mandatory:
Essential things to be considered for the legitimacy of Cheque Bounce Notice
The notice must be drafted in reference to Section 138 of the Negotiable Instruments Act, 1881;
Information concerning the cheque presentation,
Cause for non-realization of payment and
Details regarding the request made to the drawer of the cheque to make payment immediately
A notice should be presented within 30 days of return of cheque to the drawer of the cheque.
When you can issue Cheque Bounce Notice?
The cheque has to be presented within 6 months from the date of issue.
The cheque should have been dishonoured due to lack of funds.
The drawer of the cheque has not paid the sum within 15 days from the date of serving the notice.
The recipient has intimated the drawer of the cheque within 30 days from the date when the cheque was bounced.
The cheque has been given for settlement of any previous liability.
How to Send Cheque Bounce Notice?
A Cheque bounce notice can be drafted by our legal experts. After the drafting is done, it is required to take a print of the notice on a plain paper. After that notice is delivered to the drawer of the cheque. Cheque bounce notice should contain the following information:
Name of the cheque recipient,
Name and address of the drawer of check,
Reasons for cheque return,
The return date of the cheque,
Request made to the drawer of a check for immediate payment and
The notice is issued as per the provisions of section 138 of the Negotiable Instrument Act, 1881.
The cheque bounce notice is sent through a registered post to officially record issuing date of the notice. Cheque recipient can keep one copy of the notice with himself while the other copy is delivered to the drawer of check by registered post.
When and Why Cheque Bounce Notice is issued?
The foremost condition is that cheque should be towards the liability.
Inside a period of 6 months of validity of cheque, it must be presented by the recipient.
Due to inadequate funds, the bank should have returned the cheque.
Inside a period of 30 days of the bank's receipt of information about funds' insufficiency, the demand is raised by the payee by giving a written cheque bounce notice for the payment.
Inside a period of 15 days of the receipt of the written notice of cheque bounce, issuer fails to make the payment.
Within 1 month from the date cause-of-action arise, legal action is instigated.
How to commence Legal Action in case of Cheque Bounce?
Cheque recipient issues the Cheque bounce notice by a registered post to the drawer of a check within a period of 30 days of cheque bounce. The cheque bounce notice should be in a proper format containing information regarding the nature of the transaction, the amount, the date on which cheque was deposited in the bank, the date on which cheque bounced, the reason of cheque bounce, and recipient of the check made the payment request within 15 days.
Inside a period of 30 days from the expiration of the notice period of 15 days, the recipient of the check can file a criminal case in case of non-payment from the drawer of the cheque.
Complaints about Cheque bounce must be filed in a district court of such district where the cheque was drawn.
After the case is admitted in the district court, a hearing will be conducted and summons will be sent to the concerned party under Section 138 of the Negotiable Instruments Act.
Cheque defaulter has to appear before the Court for resolution.
Punishment and Penalty for Cheque Bounce
After the court has accepted the complaint, along with an affidavit and relevant documents, the district court will issue summons and hear the matter. If found guilty, the defaulter can be imprisoned for a term that may be extended to two years or punished with a monetary penalty which might be twice the amount of the cheque. The bank also has the right to stop the facility of cheque book and close the account for repeat offences of bounced cheques.
If the issuer makes the payment within 15 days from the date of receipt of the notice, then drawer of the check will not be seen as he has committed any offence. Or else, the payee may file a complaint in a district court of the jurisdictional magistrate within one month from the date of expiry of 15 days stated in the notice.
Conclusion
Cheque Bounce Notice is nothing but a warning to the issuer that the cheque recipient will take legal action in case of non-payment of the amount stated on the cheque on an instant basis. Cheque Bounce is considered a serious offence that is punishable by fine and imprisonment, as per the provisions of the Negotiable Instrument Act, 1881.