I Did Not Pay My Loan As My Cheque Bounced. What Legal Action Can The Company Take Against Me ?

Lead India
Dec 6, 2023
4 min read

With increase in industrialisation in the present times, business transactions are largely being done through cheques. As an increase in the use of cheques for payment was seen, the number of cases reporting cheque dishonour of cheque bounce increased as well, which resulted in the need to criminalise the offence of cheque bouncing or dishonour. As a result of this, in the year 1988, the Negotiable Instruments Act, 1881, provided for the criminalisation of cheques.

What does Cheque Bounce mean ?

When a bank returns any cheque unpaid for insufficiency of the funds in the account or for any other reason, the cheque would be called as bounced. It is also referred to as cheque dishonour, as it is dishonour of payment by the drawer for some reason.

Drawer who issues the cheque, and in whose favour a cheque is issued is called Drawer.

Reasons for a Cheque Bounce ?

After a cheque gets bounced, the respective bank would issue a cheque return memo as well as the reason for the cheque bounce. Hereunder are some of the reasons for a cheque bounce-

Signature of the drawer is not similar
Overwriting on the cheque.
The cheque is presented after the validity of three months has expired.
Account of the drawer in the bank is closed.
Insufficient funds in the account of the drawer.
Payment from the respective cheque has been stopped by the account holder himself.
Insufficient amount in the account.
When words and figures for the amount in the cheque are not consistent.
If the cheque is issued by the company and there is no seal of the company
Account number does not match.
The cheque is issued from a joint account and there is only one signature on the account, the cheque gets bounced, as signatures of both account holders are required.
If either the drawer or the drawee has died.
The cheque would get bounced or dishonoured, if the drawer has become insolvent, or insane.
It is a crossed cheque.
Cheque issued is against the rules of the trust.
If some alterations are noticeable on the cheque.
If the cheque has been presented at the wrong branch.
Amount mentioned in the cheque has crossed the limit of the overdraft.

Remedies against cheque bounce

Resubmission of the cheque- The payee may ask the drawer to resubmit the cheque in order to correct the initial error if the check is dishonoured because of overwriting, a mismatched signature, or errors in the text and figures on the cheque.
Notice for cheque bounce under Section 138 of the negotiable Instruments Act- a notice for the cheque bounce is issued under Section 138 of the NIA, in case a cheque is bounced due to insufficiency of the funds. In case the cheque gets bounced due to some other reason, a notice cannot be issued and the payee can demand for another cheque.

After the notice for cheque bounce has been issued

A notice could be issued within a period of 30 days after an intimation has been sent by the bank that the payment could not be made due to insufficient amount.
The payee must give the drawer a period of 15 days from the date of receiving the notice sent by him.
A legal action could be initiated within a period of 30 days after the expiry of 15 days notice period has ended.
Also, a notice cannot be issued if the cheque was issued as a donation or a gift or any such obligation which is not legally enforceable. The check must be written off in order to satisfy a legally enforceable obligation.

Procedure to be followed

A complaint is filed before the Magistrate of appropriate jurisdiction after expiry of the 15 days time period.
The payee/complainant is required to appear before the Magistrate and provide the details of the case. If the Magistrate is satisfied with the same, summons shall be issued to the drawer to appear before the court.
Afterwards the defendant is required to file his statement and arguments and evidence are produced in the court.
A conviction for the crime of check bounce will be issued by the court if the drawer is found guilty.

Conclusion

As could be inferred from the above article, whether you are the victim of a cheque bounce case or if you are defending yourself in a cheque bounce case, it is important to seek proper legal guidance from experienced cheque bounce lawyers in your city where you are facing the problem, as he could help you write a proper legal notice for cheque bounce as per the requirement of your case, as when the drawer does not provide a satisfactory reply to your notice and you decide to continue the case in the court, the cheque bounce notice so sent would be very helpful for your case. Also, in case, a notice for cheque bounce or a legal notice for non payment of loan is served to you, it is advised that you immediately contact an experienced lawyer, who can advise you as to what step would be helpful in your case and can help you draft a notice for the same.

If you wish to talk to a lawyer or seek free legal advice online for a cheque bounce case or any other legal issue related to a criminal or civil case, you may contact us at Lead India.