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When we hear about a cheque bounce, all we imagine is legal proceedings and criminal charges. But did you know, not every cheque bounce case can be proceeded with for criminal proceedings? That’s because not every cheque bounce is a crime.
To understand this, one should know that a cheque bounce means return of cheque as unpaid due to certain gaps. The gaps may be unmatched signatures, discrepancy with the amount mentioned, expired cheque, etc. including return due to insufficient funds in the account. It may be noted that the law only provides for the right to initiate criminal proceedings for a cheque bounce due to insufficient funds, termed as cheque dishonour.
The Section 138 of the Negotiable Instruments Act, 1881 defines and provides punishment for “Dishonour of cheque for insufficiency, etc., of funds in the account.”
The provision states that
“Where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall, without prejudice to any other provision of this Act, be punished with imprisonment for [a term which may be extended to two years’], or with fine which may extend to twice the amount of the cheque, or with both”
In simple words, if a person issues a cheque against payment for a debt or a legal liability, and the said cheque is returned when presented for encashment, due to insufficient funds, or exceeds the limit set for the account, he/she can be punished for cheque dishonour.
The cheque bounce case procedure is more or less provided under Section 138 itself. The timelines are crucial, and that’s the reason one should be wary of any delays in filing a cheque bounce case. The pointers below lay some of the crucial procedural milestones in a cheque bounce case:
Cheque Bounce Memo
When a cheque is presented for encashment to the payee bank and the same is returned unpaid due to insufficiency of funds, a memo is handed over. It serves as a proof for cheque bounce case, and thus, needs to be kept carefully.
Cheque Bounce Legal Notice
The legal notice plays a vital role in initiating legal proceedings for a cheque bounce case. The legal notice has to be sent within 30 days after receiving information about the cheque dishonour. The said notice communicates 15 days for repayment of the amount mentioned in the cheque. After expiry of 15 days since the legal notice was served, the cause of action arises for initiating legal proceedings. Experts at Online Legal Query can help draft an effective legal notice.
Complaint for Cheque Dishonour
The victim who suffered financial loss due to cheque bounce may approach the Magistrate or any other authority concerned to file a criminal complaint for cheque bounce.
Summoning
The parties involved are summoned by the authority concerned. Efficient drafting and documentation can help get better results in a cheque bounce case.
Evidence and Arguments
Both the parties, the complainant and the respondent bring in evidence to support their stance, and arguments bring in the weightage for the Judicial Officer to decide whether cheque dishonour occurred in accordance with section 138 of NI Act, and delivers verdict accordingly.
If a person is accused of cheque dishonour under Section 138 of NI Act, he/she can be punished with imprisonment which may be extended upto two years, and with fine which may be extended to twice the amount of cheque.