Cheque is a negotiable instrument used in almost all types of transactions such as payment of salary, fees, bills, re-payment of loan or etc. Normally cheques are issued for the reason statutory requirement and for the reason of securing proof of payment. In legal terms, the author of the cheque is called ‘drawer’, a person in whose favor cheque is drawn is called ‘payee’ and the bank who is directed to give the amount is known as ‘drawee’.
A cheque is applicable for payment only for 6 months from the date mentioned. After the period of six months, the cheque is called ‘stale cheque’.
Cheque Bouncing “Dishonor of a cheque” is when a cheque is returned by bank on which it was drawn due to lack of required funds. When a cheque is dishonored, the bank sends ‘Cheque Return Memo’ along with the cheque to the banker of payee stating the explanations or reasons for a cheque being returned. In turn the payee’s banker shall give the dishonored cheque and memo to the payee. The payee can again submit the cheque within three months of date mentioned on the cheque if he/she believes it will be honored next time.
Reasons for Bouncing of Cheque in India
- Insufficient balance
- Mismatch in signature
- Closing of account
- Overwriting in the cheque
- Cheque has expired i.e. presented after the lapse of six months
- Insanity or death of the customer
- Crossed cheque
- Payment stopped by the account holder
- Account number did not match
- Alteration in cheque
- Presented at the wrong branch
- Insolvency of the customer
- Crossing limit of overdraft (OD)
- Only one sign in case of joint account
- Disparity in the words and figures mentioned on the cheque
- Doubt in genuineness of the cheque
Section 138 of the Negotiable Instruments Act, 1881
Section 138 of the Negotiable Instruments Act, 1881 states that “dishonor of cheque” is a criminal offence and is punishable with imprisonment up-to two years or with penalty which may increase to two times the amount of the cheque, or with both.
The payee has an option left for him i.e. to proceed legally in which drawer should be given a chance in the form of notice in writing for repaying the cheque amount immediately. To draft a legal notice, it is necessary to understand the components of offence of dishonor of cheque that is being supposed by means of such notice.
Conditions for Prosecution:-
Following are some of the ingredients of the offence as articulated under Sec.138 of the Negotiable Instruments Act, 1881:
- The cheque must have been presented within six months at paying bank or within validity period whichever is prior.
- The cheque should be drawn for the discharge of existence of a debt or a liability.
- The act of dishonor must be informed to the Drawer by legal notice within 30 days of receipt of the dishonored cheque, through Registered post, under Speed Post or Postal even it can also be sent through fax, post, e-mails, courier etc.
- Drawer fails to make payment within 15 days of receipt of notice for demand of payment unpaid.
- Cheque must be returned unpaid for the reason of insufficient funds or it may exceed the amount arranged.
If a drawer does not make payment of the cheque amount within 15 days from date of receipt of the notice, payee may file a complaint in the jurisdictional magistrate court within one month from expiry date of 15 days as mentioned in the notice.
Preparation of legal notice in accordance with legal requirements and procedure of filing complaints involves various factors to be considered. Our well versed and experienced advocates help you to resolve this problem in an efficient manner and draft a Cheque Bounce Notice in consonance with all the legal provisions therein in a time bound manner.
How it is done?
Step1:- Receive free consultation on Cheque Bounce notice by our Legal experts
Step2:- Make Payment
Step3:- Provide necessary Facts and documents pertaining to the matter
Step4:- Receive the first draft within 7 days (Don’t like the draft, get upto 3 re-iterations free)
Step5:- After the draft is approved by the client, Notice is then sent via Registered AD Courrier
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