Under Section 138 of the Negotiable Instruments Act, 1881, cheque bounce is a punishable offense. The offender is subjected to monetary compensation which is equal to almost twice the value of the faulty cheque amount. The person involved in the case can be put behind the bars along with a fine, imprisonment in the case of a cheque bounce could last up to 2 years.
Cheque Bounce-
When the payee offers a cheque to a commercial bank for payment and the said cheque gets canceled due to declination from the bank on the grounds of insufficient funds, the cheque is identified as a bounced cheque.
Reasons for a cheque bounce event could be many. When the cheque is bounced because of an inadequate sum in the cheque drawer’s bank account, this shall be summed up as an offense under the Negotiable Instruments Act.
In this situation, the bank declines the cheque and cancels the payment process. The processing bank issues an invoice or return memo which shall declare the reason for payment failure, in the present situation it would be due to insufficient bank balance.
Cheque bounce rates-
When a cheque payment is disapproved due to inadequate funds or even due to technical issues such as dissimilarity in the signature, the bank issues a fine to both the payee and the defaulter.
For example, in the State Bank of India, if the p[payment is disapproved due to insufficient balance, then for all segments the deduction is Rs 500 + GST; if the payment is declined due to technical issues i.e. the fault of the customer, then Rs.150 is deducted.
What happens when a bounce notice has been issued?
The first step shall be for the payee to send a legal notice to the drawer for the cheque bounce within 30 days from the date of receiving the ‘cheque return memo’, and demanding the payment to the payee within a period of 15 days from the day the notice was received. For drafting and sending the notice you can seek legal advice from an experienced Cheque Bounce Lawyers In Kolkata .
The payee can initiate a civil action, in case no remittance is provided within a period of 15 days from the date the cheque bounce notice was issued.
The payee can file the complaint in the Court of the Judicial Magistrate of First Class or Metropolitan Magistrate (MM).
The complaint has to be filed along with an affidavit by the payee or the complainant.
The documents and complaints will be examined by the concerned MM, to confirm the commission of an offense.
Once it is confirmed the commission of an offense, a summons for the hearing of a summary trial shall be issued.
On the date of hearing, in case the drawer/accused appears, the MM shall ask him to submit a bail bond to make certain that he/she appears during the trials.
After hearing the arguments from both sides, the MM passes the final judgment.
Do’s and Don’ts in case of cheque bounce-
To avail of the remedies provided for the event of cheque bounce, the payee shall keep the following points in mind-
A complaint has to be filed within a period of 30 days from the date of receiving the reply to the legal notice that was sent to the drawer or within a period of 30 days after the expiry of the period of 15 days from the date the notice was sent and no reply was received from the drawer of the cheques.
In case there was a failure in filing the complaint within a period of 30 days, it could be excused by the MM in case of exceptional circumstances only.
Section 138 of the NI Act also provides for the case the cheque was bounced if the drawer stopped the payment of the cheque.
For the applicability of Section 138 of the NI Act, it is necessary that the cheques were issued as a legal obligation. Thus, if the cheque was issued as a gift, donation, or for any other such reason, won’t be provided under the said provision of law.
The cheque expires after three months of its issuance.
Thus, in case of a cheque bounce, it is advised to seek legal assistance from an experienced Corporate Lawyers In Gurgaon. Lead India offers you a team of experienced advocates who have year’s long experience in successfully dealing with cases related to business laws, including the cases of cheque bounce.
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