In India, it is illegal to bounce cheques, as stated in Section 138 of the Negotiation Instruments Act, of 1881. Therefore, if a court receives a complaint and the defaulter is found guilty, they may face a two-year prison sentence and/or a fine that equals double the amount of the Cheque. Nevertheless, the Cheque bounces for a variety of reasons, including inadequate cash, which creates issues for both the payment and the payee. The account holder may face legal repercussions after the bank alerts them to the account’s low balance.
Effects of a Bounced Cheque?
In India, a bounced Cheque can have major financial and legal repercussions.
1. Financial penalties – A penalty will be imposed by the bank for dishonoring a Cheque.
2. Prosecution of crimes –Â According to Section 138 of the Negotiated Instruments Act of 1881, the drawer of a Cheque may face legal action if the Cheque is returned for insufficient money. This is a crime, and the drawer faces a maximum two-year prison sentence, a fine equal to twice the amount of the Cheque, or both.
3. Civil litigation – To recoup the Cheque money, the person who received the dishonored Cheque may potentially bring a civil lawsuit against the drawer. A claim for damages for any damage or hardship resulting from the dishonored Cheque may also be made by the payee.
4. Damage to One’s Reputation – A cheque that is returned unpaid might harm the drawer’s reputation.
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Cheque Bounce Guidelines –
There are several guidelines that one must go by when submitting a cheque bounce case.
- Sending the offender a demand notice is the first step.
- The offender has fifteen days from the date of notice to make the required payment.
- The payee must notify the drawer of the return of the check memo within 30 days after receiving it, per Section 138 under the 1881 Negotiable Instruments Act.
- If the drawer defaults, the individual filing the cheque bounce case is entitled to file a formal complaint with the court, supporting documentation included.
- Among the most significant documents is the bank’s check return memo. Without this document, the court will not be able to continue with the case.
- If a defaulted check was a gift or used as collateral for a loan payment, the defaulter is not subject to penalties under the cheque bounce statute.
India’s new Cheque Bounce regulations
Those who use Cheques regularly or who just want to use them would have to keep a minimum bank balance, according to a letter sent out by the Reserve Bank of India in early August 2021. The Cheques will bounce if the minimum amount is not kept up to date. The person who wrote the Cheque can potentially be responsible for a penalty fee. The NACH stands for National Automated Clearing House, which was also modified and has been made by the RBI.
All commercial and public banks must implement these changes. The purpose of the new rule is to expedite and enhance the overall process of clearing Cheques. The new rule guarantees NACH’s daily operations, enabling it to manage and provide Cheques.
India’s Reasons For Cheque Bounce
A Cheque may bounce for a variety of reasons. The most common one is that when the Cheque is presented, there is not enough money in the payer’s bank account.
1. Not enough money – If there are insufficient funds in the payer’s account, the Cheque will be returned, or “bounced.”
2. Signature mismatch – The Cheque may be rejected if the signature on it does not match the one on file with the bank.
3. The Wrong Account Number – The Cheque may bounce if it does not match the payer’s account number on the other side.
4. A damaged Cheque – An altered or vandalized Cheque could result in the bank refusing to accept it.
5. A dated Cheque – A Cheque that is presented after the date it was written may bounce.
6. Instruction to Stop Payment – The Cheque will bounce if the payer asks their bank to stop processing it.
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How a Check Bounce Case is Handled
Step 1: The individual who gave you the bounced Cheque should get a Demand Notice as soon as possible.
Step 2: A copy of the memo that was returned unhonoured and the date that the check was sent out should both be included in the notice.
Step 3: After receiving the notification, the person gets 15 days to reimburse you.
Step 4: If they aren’t, you can submit a complaint with the court using the required format.
Step 5: In addition to the complaint form, you must also provide an oath letter, which is a copy of the notification sent along with the acknowledgment of the receipt, a photocopy of the memo, and the received bounced Cheque.
Step 6: After receiving your complaint, the judicial court will examine and confirm the documents you submitted.
Step 7: If the court finds a Cheque return case to be satisfactory, the party making the complaint or their attorneys will need to complete or Cheque the bounce case handle form. Following this, the accused will be called to appear in court.
Step 8: The judge has the power to issue an eligible bail warrant against the accused if they do not show up for court.
Files Required in the Case of the Cheque Bounce
To file a complaint about an individual in a matter involving a return of checks, you must submit the following paperwork with an application:
The initial cheque.
A note explaining why the bank did not pay the amount due on the returned cheque.
A copy of the original receipts and the demand notice.
An affidavit providing proof.
How Should a Cheque Bounces Case Be Handled?
To stop further legal action, the first step is to respond with a legal notification with your defense or to pay the required amount by check. Therefore, you should speak with a lawyer who specializes in cheque bounces before responding. If the entire amount on the check is paid upfront, the problem will be fixed right away. Though the answer to a legal notice might take many different forms, make sure you cover the following areas.
1. The answer to the legal notice ought to be sent to the drawee’s lawyer.
2. Provide your name, address, and a succinct bio.
3. Information on the issue, such as the memo about the cheque that was returned.
4. Respond to the critiques that you have received.
5. Avoid responding to any of the notifications’ queries that make any accusations against you.
6. Any grievances directed at the recipient of the check.
7. A letter outlining your defense to the claims made in the legal notice of a bounced cheque.
8. For all letters responding to a legal notification, letterhead must be utilized.
Cheque Bounce Lawyers The drawee has the right to file a complaint to a court, which will start legal action against you if you don’t respond to the legal notifications or pay the amount on the check within 15 days.