×

Do's & Dont's in case of a Cheque Bounce


  • Introduction: What is a cheque?

    A Cheque is a bill of exchange drawn upon a specified banker and is payable only on demand. Legally, the person who has issued the cheque is called as 'drawer' and the person in whose favour the cheque is issued is called as 'drawee'. The following are the essential characteristics of a cheque:

    1. It has to be in writing
    2. It has to be an unconditional order
    3. Banker has to be specified
    4. Payment should be directed to a specified person
    5. It should be payable on demand
    6. It should be for a specific sum of money
    7. Should have the signature of the drawer


    What is cheque bounce/dishonour of cheque?

    A cheque is said to be dishonoured or bounced when it is presented for payment to a bank but it is not paid because of some reason or the other. The following are some of the reasons why a cheque is generally bounced :

    1. Signature is not matching
    2. There is overwriting in the cheque
    3. Cheque was presented after lapse of three months, i.e. after the cheque has expired
    4. Account was closed
    5. Insufficient funds in the account
    6. Payment stopped by the account holder
    7. Opening balance insufficient
    8. Disparity in the words and figures mentioned on the cheque
    9. In case the cheque is issued by a company, the same does not bear the seal of the company
    10. Mismatch in account number
    11. In case of joint account where both signatures are required, only one sign is there
    12. Death of the customer
    13. Insolvency of the customer
    14. Insanity of the customer
    15. Crossed cheque
    16. When a cheque is issued against the rules of trust
    17. Alteration in cheque
    18. Doubt in genuineness of the cheque
    19. Presented at the wrong branch
    20. Crossing limit of overdraft (OD)


    Legal Remedies available in case your cheque is bounced

    Cheque bounce is a criminal offence in India, covered under section 138 of the Negotiable Instruments Act. The following information will act a useful guide in what steps can be undertaken in case your cheque is bounced:


    Step 1: Demand Notice:

    Once the cheque has been returned by the bank, then before filing a legal complaint against the drawer, you must first send a demand letter/ legal notice to such drawer within a period of 30 days from the date the cheque has been returned to you by the bank. The letter must demand the amount from the drawer and also the legal action that can be initiated against him under the Negotiable Instruments Act in case the amount is not paid within a stipulated time period (usually 15 days).

    Even though there is no prescribed format for this notice, its purpose of demanding payment and informing the issuer that s/he will be prosecuted in case payment is not made should be highlighted very clearly. Further, proof of delivery of such letter should be preserved carefully.

    Demand letter can be sent by the complainant her/himself. However, it is advisable to get the draft vetted by a cheque bounce lawyer before sending it to the person concerned.

    The following information should be stated clearly in the demand notice:

    • A statement that the cheque was presented within its period of validity
    • Statement of debt or legally enforceable liability
    • Information regarding dishonour of cheque as given by the bank
    • Demanding the issuer to pay the amount due within 15 days of receiving such notice


    Step 2: Drafting of Complaint:

    If the drawer has not replied to your demand notice within a period of 15 days from the date of the delivery of the demand letter or has refused to pay your amount, then the next option available in such a case is to file a complaint in court within a stipulated time period of 30 days. Before filing a legal complaint, it is important to understand that which court should you approach in such cases. You can file the complaint in a court within whose local limits of jurisdiction any of the following incidents have taken place:

    • Where the cheque was drawn
    • Where the cheque was presented
    • Where the cheque was returned by the bank
    • Where the demand notice was served by you
    You must have all the following documents:
    • Complaint
    • Oath letter
    • Photocopy of all the documents such as cheque, memo, notice copy, and acknowledgement receipts


    Step 3: Court Process for filing the case:

    Amount on cheque

    Court fee

    Rs. 0 to Rs. 50,000/-

    Rs. 200

    Rs. 50,000/- to Rs. 2,00,000/-

    Rs. 500

    Above Rs. 2,00,000/-

    Rs. 1000

     
    1. Memo of Advocate is essential at the time of filing of the suit along with signatures of the complainant
    2. After the case is filed in the court, all documents are cross-checked by Judicial Magistrate First Class, so original documents such as original cheque (bounced), original memo, a copy of the notice, receipt of the post office, receipt of U.P.C., acknowledgement receipt, are required at the time of cross-checking
    3. The period of limitation is also verified at this stage
    4. The Process Form, also known as the Bhatta, is filed by the complainant or lawyer, along with the address of accused
    5. The court then issues summons to accused to appear in the court on the specific date
    6. If the accused does not appear in court on the date of hearing, the court can also issue a bailable warrant on the request of the complainant
    7. It the accused still does not appear before the court, the court may issue a non-bailable warrant of arrest


    Important things to be kept in mind

    1. A delay in filing the complaint after the lapse of 30 days may be excused by the magistrate only in exceptional circumstances
    2. Dishonour of a cheque due to stop payment is also covered under Section 138 of the NI Act
    3. Presentation of the cheque at the request of the drawer after the demand notice has been sent and the consequent dishonour of the cheque will not mean that the drawer’s time limit under the notice has increased
    4. A cheque issued as a gift/donation/any other obligation, will not be covered under Section 138 of the Act. For this section to apply, the cheque has to carry a legal obligation
    5. A cheque expires after three months from the date on which it is issued


    Learn what should be & what shouldn't be done in case of a cheque bounce with this complete guide for Indian Laws on cheque bounce.

    Visit the Indian Kanoon section of LawRato to learn more about Indian Laws.

     

    Send a legal notice for cheque bounce


    Know More

    These guides are not legal advice, nor a substitute for a lawyer

    These articles are provided freely as general guides. While we do our best to make sure these guides are helpful, we do not give any guarantee that they are accurate or appropriate to your situation, or take any responsibility for any loss their use might cause you. Do not rely on information provided here without seeking experienced legal advice first. If in doubt, please always consult a lawyer.

  • See the video below to know more about this Cheque Bounce legal issue



Get free legal advice from top Cheque Bounce lawyers for your specific issue

Cheque Bounce Lawyers in India

Advocate Ramakrishnan S.

  Cunningham Road
 Experience: 11 years


Advocate Harish Malhotra

  District Court
 Experience: 20 years


View all >>

Get free assistance for your legal issue

Quick Consult

Get 15 Minutes of Expert Legal Advice on Phone right now

Ask a Free Question

Post a Question online and get free advice from multiple lawyers by email

Find a Lawyer

Easily find and book private consults with top lawyers in India

Get Fee Estimate

Receive multiple quotations for your legal requirement instantly


We're in News