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Process For Cheque Bounce Case Notice
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What is Cheque Bounce?
Cheque bounce is a criminal offence in India, covered under Section 138 of the Negotiable Instruments Act of 1881. So, if a complaint is filed in a court and, if found guilty, the defaulter can be punished with a prison term of two years and/or a fine, which can be as high as twice the cheque amount.
However, due to insufficient funds or other reasons, the cheque bounces, causing complications for both the payer and the payee. The bank notifies the account holder about the insufficient funds in their account, leading to potential legal consequences.
Consequences of Cheque bounce?
The consequences of a cheque bounce in India can be financially and legally serious.
- Financial penalties: The bank will charge a penalty for dishonouring a cheque. This penalty can be up to ₹200, payable by the cheque's drawer.
- Criminal prosecution: If a cheque is dishonoured due to insufficient funds, the cheque drawer can be prosecuted under Section 138 of the Negotiable Instruments Act 1881. This is a criminal offence, and the drawer can be sentenced to imprisonment for up to two years, or a fine of up to twice the cheque amount, or both.
- Civil suit: The payee of the dishonoured cheque can also file a civil suit against the drawer to recover the cheque amount. The payee can also claim damages for any loss or inconvenience caused by the dishonoured cheque.
- Damage to reputation: A dishonoured cheque can damage the reputation of the drawer. This can make it difficult to get loans or credit in the future and damage relationships with businesses and individuals.
Cheque Bounce Rules
In case a person is filing cheque bounce case, there are certain Cheque Bounce rules they have to follow.
- The first step is to send a demand notice to the offender
- Once the notice is received, the offender has 15 days to make the due payment
- Under Section 138 of the Negotiable Instruments Act, 1881, the payee has to send the drawer a notice within 30 days of receiving the cheque return memo
- If the drawer fails to make the payment, then the person filling the cheque bounce case has every right to file a complaint with the court by submitting a written complaint along with valid documents
- The bank's cheque return memo is one of the most important documents. The court will be unable to proceed with the case without this document
- The defaulter cannot be penalized in the eyes of the cheque bounce law if the bounced cheque was given as a gift or used to lend money for a loan payment.
New Cheque Bounce Rules in India
According to a letter the Reserve Bank of India (RBI) handed out in early August 2021, customers who frequently use cheques or who just desire to use cheques will need to maintain a minimum bank balance. If this minimum balance is not maintained, the cheques will bounce. A penalty charge may also be owed by the individual who wrote the cheque. The RBI has made the National Automated Clearing House (NACH), which was also updated.
These reforms apply to all public and commercial banks. The new regulation was implemented to speed up and overall improve cheque clearance. The new regulation ensures that NACH will be open every day of the week, allowing it to process and pass cheque on Sundays.
Reasons for Cheque Bounce in India
There are many reasons why a cheque might bounce. The most frequent one is that the payer's bank account doesn't have enough money when the cheque is presented. This is known as 'insufficient funds bounce.'
1. Insufficient Funds: If the payer's account does not hold enough money, the cheque will be returned or 'bounced.'
2. Signature mismatch: When the signature on the cheque differs from the one registered with the bank, the cheque may be refused.
3. Incorrect account number: If the account number written on the cheque does not correspond with the payer's account, the cheque could bounce.
4. Damaged cheque: A disfigured or defaced cheque may lead the bank to dishonor it.
5. Dated cheque: If a cheque is presented after its written date, it could result in a bounce.
6. Stop Payment instruction: If the payer requests their bank to halt the cheque payment, it will consequently bounce.
Procedure for a Cheque Bounce Case
- Step 1: The first step is to send a Demand Notice to the person who has issued you a bounced cheque
- Step 2: The notice should include details regarding the bounced cheque. The notice should include information such as the date the check was issued and a copy of the dishonoured memo
- Step 3: The person has 15 days from the time they receive the notice to pay you
- Step 4: If they don't, you can file a complaint in the prescribed format in the court
- Step 5: You must also present an oath letter, a copy of the notice issued with the acknowledgement receipt, a photocopy of the memo, and the bounced cheque received, in addition to the complaint form
- Step 6: When the judicial court gets your complaint, it will review and verify the documents you sent
- Step 7: Once the court is satisfied with your cheque return case, the complainant or their lawyers must fill out the bhatta or cheque bounce case process form, after which the accused is summoned to appear in court
- Step 8: If the accused fails to appear in court, the judge has the authority to issue a bailable warrant against the person in question.
Note: It is advisable to hire lawyers to assist you with filing a cheque return case. This is because lawyers are familiar with the entire cheque bounce case process and how to fill out the form in the appropriate legal format.
Documents Needed for Cheque Bounce case
While filing a complaint against a party in a cheque return case, you need to submit an application form along with the following documents:
- The original cheque
- Memo of returning cheque which would contain the reason about non-payment by the bank
- Copy of demand notice and the original receipts.
- An affidavit stating evidence.
How to Respond to a Cheque Bounce Case?
The initial stage is to reply to the legal notice with your defence or pay the requisite sum by cheque in order to halt future legal proceedings. Thus, before answering, you must first consult a lawyer who focuses on cheque bounces. If the cheque amount is paid at the beginning, the issue will be resolved immediately. Despite the fact that the format for the answer to the legal notice is flexible, be sure to address the following points:
- The drawee's attorney should receive the response to the legal notification
- Name, address, and a brief description of yourself
- Details regarding the problem, like the memo describing a returned cheque
- Answer the criticisms that have been levelled at you
- Refrain from answering any of the questions in the notification that accuse you of anything
- Any complaints against the cheque beneficiary
- A response to the allegations in the legal notification for a bounced cheque, setting out your defence
- A legal letterhead must be used for every correspondence in response to a legal notice.
If you don't answer the legal notification or pay the cheque amount within 15 days, the drawee is legally entitled to file a complaint with the court, which will launch legal action against you.
How to Issue Cheque Bounce Notice?
If you have received a bounced cheque from someone, you have the right to take legal action against the issuer of the cheque. The initial stage in this procedure is to send an official notice of a bounced cheque to the issuer, asking payment of the amount due. Here's how to send a notice about a bounced check:
- Create a Demand notice: The first action is to create a notice for a bounced check. Details like the cheque number, the cheque's amount, the cause of the bounce, and a demand for payment of the amount should be included in the notice.
- Send the notice: Send the notice to the issuer of the cheque through registered post or hand delivery, and ensure that you have proof of delivery
- Wait for a response: Once the issuer receives the notice, they have 15 days to make the payment. If they fail to do so, you can proceed with legal action.
It is important to note that cheque bounce notices should be drafted and sent by a legal professional or a person with knowledge of the legal procedures involved.
Cheque Bounce Notice Format
A cheque bounce notice is a legal document that demands payment of the amount due on a bounced cheque. Here's a standard format for a cheque bounce notice:
- Your name and address
- Date of notice
- Name and address of the issuer of the cheque
- Details of the bounced cheque, including cheque number, date of issue, amount, and reason for bounce
- In 15 days of procuring the notice, the demand for payment is made
- A threat of legal action is issued if money is not received within the allotted period.
It is important to note that the format of the cheque bounce notice may vary depending on the specific circumstances and legal requirements.
Contents of Cheque Bounce Notice
The cheque bounce notice should include the following contents:
- Details of the cheque, including the cheque number, date of issue, amount, and the bank on which it was drawn
- Reason for the bounce, which could be due to insufficient funds, mismatched signatures, or other reasons
- Demand for payment of the amount due, which should include the principal amount, interest, and any other charges
- An intimation regarding the legal action if the payment is not made within the stipulated time
- The legal notice has to be sent through a registered post and the sender should have the proof of delivery.
It is important to draft the cheque bounce notice carefully, ensuring that it complies with the legal requirements and includes all relevant information. It is highly recommended to get in touch with our Legal Experts to resolve all your queries regarding the process. Our team will draft the legal notice aptly.
How Can A Lawyer Help To Draft Cheque Bounce Notice Format?
It's crucial to draft a cheque bounce notice in case of recovering the money. Since the notice serves as the first step towards initiating a legal proceeding, it is advisable to seek the assistance of a cheque bounce lawyer. Our team of expert lawyers can help in case of cheque bounces in the following way:
1. Our professional possesses the required expertise and knowledge to prepare a legally sound notice
2. We can gather crucial information on behalf of their client and draft the notice accordingly
3. Cheque bounce lawyer can ensure that you are on the right track towards achieving justice
4. Our legal team can handle all the necessary legal documentation with efficiency.
Thus, it is crucial to hire an experienced cheque bounce lawyer to ensure that the legal notice is sent appropriately and considering the potential litigation that may follow
Process of Cheque Bounce Suit
The process of a cheque bounce suit is as follows:
1. Filing a complaint: The payee must file a complaint with the court of the Judicial Magistrate. The complaint must be in writing and must contain the following information:
- The name and address of the payee
- The name and address of the drawer
- The date of the cheque
- The number of the cheque
- The amount of the cheque
- The reason why the cheque was dishonored
- Copies of the cheque, the cheque bounce notice, and the acknowledgment of receipt of the cheque bounce notice
2. Issuance of summons: The magistrate will issue a summons to the drawer, directing him to appear in court on a specified date to answer the charges.
3. Appearance of the drawer: The drawer must appear in court on the specified date. If he fails to appear, the court may issue a warrant for his arrest.
4. Examination of the complainant: The magistrate will examine the complainant and his witnesses.
5. Examination of the drawer: The magistrate will then examine the drawer. The drawer may plead guilty or not guilty.
6. Judgment: If the drawer pleads guilty, the magistrate will convict him and pass sentence. The sentence may include imprisonment for up to two years or a fine of twice the amount of the cheque, or both. If the drawer pleads not guilty, the magistrate will hear evidence from both sides and then deliver a judgment. If the magistrate finds the drawer guilty, he will convict him and pass sentence. If the magistrate finds the drawer not guilty, he will dismiss the case.
Why Vakilsearch?
We at Vakilsearch are constantly working to make the legal cheque bounce case process in India more accessible. We know the best practices and laws. Here are some reasons why you should choose us:
- There are no additional fees.
- Your personal information is kept private and secure.
- You'll have access to the finest legal experts and in the field.
Note: For every issue or concern you may have, our experts will assess your situation and advise you on the best course of action.
FAQ's
Recent Updates
The Bombay High Court has granted an interim stay on the trial court proceedings in a cheque bouncing case of ₹200 crores involving businessman Anil Ambani. The stay was granted under Section 138 of the Negotiable Instruments Act, in connection with a writ petition filed by two co-accused. Anil Ambani is accused of bouncing a post-dated cheque for ₹200 crores in relation to a recall notice issued by LIC for outstanding NCDs. The matter has been adjourned to 12 July 2023.