criminal-law , financial-law , international-law , law-services

Be Careful issuance of bounce cheque is a criminal offence

Be Careful issuance of bounce cheque is a criminal offence   A cheque is an instrument which is payable on demand. There are two parties in a transaction, An individual who gives the cheques recognized as the drawer, whereas the person/firm under whose custody this instrument is issued is known as the drawee. A cheque bounce is a situation in which the cheque cannot be processed because of the insufficient funds that are available in an individual’s bank account. There are many reasons which can lead to a cheque bounce. To overcome such scenarios, the drawee issues a cheque bounce notice or a demand notice to the drawer. The Cheque bounce notice states that if the amount due is not paid within the prescribed time, and then the drawee will initiate legal proceedings in the provision of section 138 of the Negotiable Instruments Act 1881against thedrawer. in the light of above mention section and act, a cheque is a bill of exchange, promissory note, or a cheque. The cheques are governed under the Negotiable Instruments Act 1881. Section 138 of the Negotiable Instrument Act 1881 states the provision relating to the dishonour of cheque for failure of sufficient amount in the bank wallet. If there is such type of instrument issued by the drawer to the drawee to pay any amount and that instrument is not accepted/dishonoured by financial institute due to insufficient money in the bank accounts to honour the cheque. The cheque is also dishonoured if it certain amount in not available in the bank wallet against that amount which is written on cheque. Hence, an individual has a right to submit a criminal case under the provision of section 138 of the Negotiable Instrument Act 1881, and it can also file a Summary suit under Order 37 of the Criminal Procedure Code 1908. Following are the reasons behind a cheque bounce: A wrong date mentioned on the cheque It has been observed that the drawer of the cheque mentions a wrong date in the cheque which results in cheque bounce. Not only the wrong date but if the drawer mentions a date before 90 days, then also the cheque is dishonoured by the bank. Moreover, if the cheque is post-dated and the drawee deposits the cheque earlier than the date, it results in cheque bounce. To avoid committing the default of cheque bounce, the drawer must mention the correct date in the cheque. Signature is mismatched The bank will dishonour the cheque if the drawer’s signature is mismatched. It has been observed that many times people tend to forget their signature and end up signing a wrong signature on the cheque. If the signature does not match with the bank’s record, it results in cheque bounce. To avoid such situations, the signature of the drawer must match his bank record. Insufficient Funds in the drawer’s bank account The bank dishonours the cheque if there is any shortage/lack of funds in the drawer’s bank account from which the cheque has been issued. In situation of insufficient funds in financial institute wallet, the bank will stop the payment. It will also levy a penalty to both drawer and drawee. Insufficient funds are one of the main reasons for cheque bounce cases. To avoid cheque bouncing, the drawer must ensure that there is sufficient balance in his bank account before issuing any cheque. Overwriting on the cheque A bank has the authority to dishonour the cheque if the drawer has scribbled or has done overwriting on the cheque. The cheque must be kept in good condition. If the bank finds that the cheque is in a bad condition or is damaged and the details mentioned in the cheque are not clearly/properly visible, then it results in cheque bounce. The different amount of mentioned in words and numbers sections The bank dishonours the cheque if there is an unusual amount mentioned in the words and numbers in the cheque. The amounts specified in words must be the same as the amount mentioned under the numerical representation. This common mistake can lead to a cheque bounce. To avoid the cheque bouncing, one must write the same amount in both the sections (words and numbers). Legal Action
  • The Cheque bounce is considered a serious offence that is committed by the in the light of above mentioned section and act. The first step is to issue a cheque bounce notice. The drawee issues a cheque bounce announcement to the drawer in one month from the cheque dishonour. The notice must consist of information relating to the nature of the transaction, the amount specified, the date on which the cheque is deposited, the date on which the cheque is dishonoured, the reason behind cheque bounce and to request the payment of the amount (that was dishonoured by the bank) within 15 days from the issuance of such notice. The cheque bounce notice must also include the details of the drawer, and it should specify that the cheque was presented within the validity period; it should also specify that the cheque was not given as a loan or a gift but for discharging the debt. If the drawer makes the payment after receiving the cheque bounce notice, then there is no need to file a case against the drawer. If the legal notice is not taken seriously by the drawer, then it may give rise to legal action.
 
  • The next step is to file a case if the drawer does not make a payment within the prescribed time. If there is no payment within 15 days by the drawer, then the drawee can file a criminal case within 30 days from the expiry of the cheque bounce notice period (15 days). The case can be filed only in the city where the drawer presented the cheque to the drawee.
After hearing the case, the court will issue summons under section 138 of the Negotiable Instrument Act 1881. Once the summons is issued, the drawer will have to appear before the court for resolving the case.
  • If the drawer is found guilty, then the penal provision mentioned under section 138 of the Negotiable Instrument Act 1881will be applied by the Court.
If the legal notice is not taken seriously by the drawer, then it may give rise to legal action. The next step is to file a case if the drawer does not make a payment within the prescribed time. If there is no payment within 15 days by the drawer, then the drawee can file a criminal case within 30 days from the expiry of the cheque bounce notice period (15 days). The case can be filed only in the city where the drawer presented the cheque to the drawee. If the drawer is found guilty, then the penal provision mentioned under section 138 of the Negotiable Instrument Act 1881will be applied by the Court. Conclusion In India, the Cheque bounce is considered a severe offence. It is also punishable with imprisonment or a fine mentioned under section 138 of the Negotiable Instruments Act 1881. The term of detention may extend up to two years, and the fine may extend to twice the amount of the cheque drawn or both. In case if the cheque is drawn in favour of a charitable trust or as an application amount of shares, then it is exempted from the cheque bounce notice. Section 143A of the Negotiable Instruments Act 1881 states the provision relating to the Interim compensation to the drawee for the inconvenience that has been caused due to the cheque dishonour. Hence, cheque bounce is one of the common problems which is still prevalent in India. It is highly advisable to appoint a professional to draft a cheque bounce notice, or legal consequences may be attracted.
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