Cheque Bounce Cases
Property law governs the ownership, transfer, and use of both movable and immovable property.
Cheque Bounce Cases Overview:
Cheque bounce, also known as dishonour of a cheque, occurs when a cheque issued by an individual is returned by the bank unpaid due to insufficient funds in the account, a mismatch in signature, or other reasons. In India, cheque bounce cases are primarily governed by the Negotiable Instruments Act, 1881, specifically under Section 138, which makes it a criminal offence if certain conditions are met.
A cheque bounce can lead to legal consequences for the issuer, including fines, imprisonment, or both, making it a serious offence in India. The law provides remedies for the aggrieved party to seek redress for financial loss or breach of trust caused by the dishonoured cheque.
Section 138 of the Negotiable Instruments Act, 1881:
Section 138 lays down the legal provisions for cheque bounce cases, which include:
Issuance of a Cheque for Discharge of Debt or Liability: The cheque must have been issued to discharge a legally enforceable debt or liability.
Cheque Dishonored: The cheque must be returned unpaid by the bank due to reasons like insufficient funds or the account being closed.
Demand Notice: After the cheque bounces, the payee (the person to whom the cheque was issued) must send a written demand notice to the drawer (issuer) within 30 days, demanding payment of the cheque amount.
Failure to Pay Within 15 Days: If the drawer fails to pay the cheque amount within 15 days of receiving the notice, the payee can file a complaint in court under Section 138.
The punishment for cheque bounce under Section 138 can include imprisonment of up to two years, a fine of up to twice the amount of the cheque, or both.
Legal Process in Cheque Bounce Cases:
Cheque Bounce Occurs: The bank returns the cheque unpaid due to reasons like insufficient funds or signature mismatch.
Sending a Demand Notice: The payee sends a demand notice to the drawer, demanding payment within 30 days of the cheque being dishonoured. The notice must specify the reason for the cheque bounce and demand repayment of the cheque amount.
Non-Payment Within 15 Days: If the drawer fails to make the payment within 15 days of receiving the notice, the payee can initiate legal proceedings.
Filing a Complaint in Court: The payee files a complaint in the jurisdictional magistrate’s court within 30 days from the expiry of the 15-day period. The complaint is filed under Section 138 of the Negotiable Instruments Act.
Court Proceedings: Once the case is filed, the court issues a summons to the drawer to appear in court. The trial proceeds based on evidence such as the bounced cheque, the return memo from the bank, and the demand notice sent by the payee.
Judgement: After hearing both sides, the court passes a judgement. If found guilty, the drawer can be punished with imprisonment, a fine, or both. In some cases, the court may order the drawer to pay compensation to the payee.
Civil vs. Criminal Remedies:
In addition to filing a criminal complaint under Section 138, the aggrieved party may also file a civil suit for recovery of the cheque amount. This helps in getting compensation for financial loss, as civil courts may order the drawer to pay the outstanding amount along with interest or damages.
Common Reasons for Cheque Bounce:
Insufficient Funds: The most common reason, where the account has insufficient balance to cover the cheque amount.
Signature Mismatch: The drawer's signature on the cheque does not match the bank’s records.
Account Closed: The account from which the cheque was issued has been closed by the drawer.
Stop Payment Instructions: The drawer gives stop-payment instructions to the bank.
Post-Dated Cheques: The cheque is presented before the date mentioned on it.
Alterations in the Cheque: Any unauthorised changes or overwriting on the cheque can lead to its dishonour.
Defences Available to the Drawer (Issuer):
In cheque bounce cases, the drawer may defend themselves by claiming:
The cheque was issued as security and not for repayment of a legally enforceable debt.
The demand notice was not served within the stipulated 30-day period.
The cheque was presented for encashment after its validity period had expired.
The cheque was lost or stolen, and the drawer had given instructions to stop payment.
How Advocates/Lawyers Can Help in Cheque Bounce Cases:
Sending Legal Notices: Lawyers help the aggrieved party draft and send a demand notice to the drawer, specifying the reason for the cheque bounce and demanding payment within the legal time frame.
Filing a Case: Advocates assist in filing a criminal complaint under Section 138 in the appropriate court and ensure that all necessary legal formalities are completed.
Representation in Court: Lawyers represent the payee or the drawer in court, presenting evidence and arguments to either prove the drawer’s guilt or defend against false claims.
Negotiation and Settlement: In many cheque bounce cases, lawyers help the parties negotiate a settlement outside of court to avoid lengthy legal proceedings and secure quick repayment of the cheque amount.
Civil Recovery: Advocates can also file civil suits for the recovery of the cheque amount, ensuring the aggrieved party gets compensation for any financial losses suffered.
Defence for the Drawer: If you are the drawer of the cheque and face a legal case, lawyers can help build a defence, such as proving that there was no legal liability or that the cheque was issued as security.
By engaging a skilled advocate, individuals and businesses can navigate the complex legal process of cheque bounce cases and ensure that their rights are protected, whether they are the payee seeking justice or the drawer defending against a wrongful claim.
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