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Ni Act Cheque Bounce Notice

  • Writer: Lead India
    Lead India
  • Aug 29, 2023
  • 4 min read

With the advent of industrialisation, business transactions are on a large scale being done with the payments through cheques. With the increase in the mode of payment through cheques, the number of cases reporting cheque dishonour and cheque bounce also increased, which resulted in the need to criminalise the offence of cheque bouncing or dishonour. As a result of which, in the year 1988, criminalisation of the written cheques was added in the Negotiable Instruments Act, 1881.

Cheque Bounce-

The situation where the bank returns any cheques unpaid due to the insufficiency of the funds in the drawer’s account and for many other reasons, the cheque shall be called to be bounced. It is also known as cheque dishonour, as it is a dishonour of payment by the drawer for some reason.

The Drawer issues the cheque, while the one in whose favour the cheque has been issued is the Drawee.


What are the reasons for a Cheque Bounce ?

After the cheque has been bounced, the respective bank issues a cheque return memo as well as the reason for the cheque bounce. Mentioned below are some of the reasons due to which the cheque gets bounced-

  • When the signature of the drawer does not match

  • In case there is some overwriting on the cheque.

  • When the cheque has been presented after the validity of three months has expired.

  • In case the account of the drawer has been closed.

  • When there are insufficient funds in the drawer’s account.

  • In case the payment from the said cheque has been stopped by the account holder himself.

  • Insufficient opening balance.

  • The words and figures mentioned in the cheque are not consistent.

  • If there is no seal of the company which has issued the cheque.

  • If the account number does not match.

  • In case the account is a joint account, then the signatures of both the account holders is necessary. The cheque get bounced if only one signature is there.

  • If the drawer or the drawee has died.

  • In case the drawer has become insolvent, or has become insane.

  • If it is a crossed cheque.

  • In case the cheque so issued is against the rules of the trust.

  • If some alterations could be noticed on the cheque.

  • If the drawee has presented the cheque at a wrong branch.

  • If the amount of the cheque has crossed the limit of the overdraft.

Remedies against the cheque bounce-

  • Resubmission of the cheque- When the cheque gets dishonoured due to overwriting, mismatch of the signature, or the figures and words on the cheque, or for similar reasons, the drawer can be asked by the payee to resubmit another cheques in order to rectify the former mistake. When the drawer disagrees to submit another cheque, the payee will have a right to initiate civil action against the drawer to pay the cheque amount which was due to him.

  • Notice for cheque bounce under Section 138 of the Negotiable Instruments Act- A notice under Section 138 of the NI Act for the cheque bounce will be issued , in case a cheque gets bounced due to insufficient funds in the account. After 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 can be issued within a period of 30 days after an intimation has been sent by the bank that the payment can not be made due to insufficient amount in the respective account.

  • A period of 15 days has to be given from the payee to the drawer from the date of having received the notice by him.

  • A legal action can be initiated within a period of 30 days after the period of 15 days notice has expired.

  • 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 cheque must be issued to discharge a liability which is legally enforceable

Procedure to be followed-

  • A complaint will be 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 evidences are produced in the court.

  • If the court finds the drawer guilty, a judgement of conviction will be passed by the court for the offence of cheque bounce.

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 advocate who could help you write a proper legal notice as per the situation of your case, as if the drawer does not give a satisfactory reply to your notice and you decide to continue the case in the court, the notice you sent would be very helpful for your case.

Similarly, if a defective legal notice u/Sec 138 of the NI Act has been sent, could be harmful for your case. Also, it has to be noticed, that the legal notice must be received by the drawer, as it would not be possible to file a 138 case if the accused did not receive legal notice.

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.


Call Us: +91–8800788535

Email: care@leadindia.law


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