The cheque bounce is a criminal offense in India and according to our law, it is punishable by imprisonment which may extend to two years orbit fine or both. Checks are a widely accepted reliable method of payment all over the world for a variety of transactions with the motive to security proof of the payment. The drawer is the person who authorizes the check and the payee is the person against whom the cheque is drawn and the bank directs the payment is the drawee. These days, the cases of cheque bounces have increased. A cheque is said to bounce when it remains unpaid order returned by the bank.
What to do if your cheque bounces?
A cheque return memo is immediately issued by the drawee bank when the cheque bounces. It is issued to the banker of the payee disclosing the reason for nonpayment. Payee’s bank then returns the bounced cheque and memo to the payee. If the holder of the check believes that it will be honored the second time then submit the cheque within 3 months of the date on the date of dishonor. On the other hand, if the payment fails again then the payee may prosecute the check issuer. If the cheque was issued as a gift, then the payee has no right to sue the drawer.
Legal protection
The negotiable instruments Act 1881 deals with such cases of cheque bounce the reason for which is insufficient balance in the account. Section 138 of the acts provides that the dishonor of cheque is a punishable offense for which imprisonment may extend to two years or fine or both. In case the payee decides to prosecute the drawer, the drawer. Is given a chance to repay the amount in the form of a written notice. The written notice should be given to the drawer within 30 days of receiving the cheque return memo. The notice should disclose the time limit of 15 days from the date of receipt for replying to the amount. In case the cheque issuer fails to repay the amount within 30 days, the payee may sue the drawer under section 138 of the negotiable instruments Act.
In the case of legal prosecution in the case of cheque bouncing, the complaint should be registered within a month of the expiry of the notice period in a magistrate’s court after consulting a well-versed advocate.
Requirements for prosecution
There are certain provisions laid down under section 138 which shall be fulfilled in order to sue the drawer-
- The drawer must have drawn the check on his account.
- The reason for the cheque bounce must be insufficient funds in the drawer’s account.
- The cheque should not be issued as a gift but towards the discharge.
- The period of 15 days from the receipt of the legal notice must expire for a prosecution to take place.
Court Proceedings
After receiving the affidavits with relevant documents, the court shall hear the matter and issue a summons. If the defaulter is proved guilty, he might be punished with a fine which may be double the amount of the cheque is may be imprisoned for 2 years, or might be punished with both. Increase the drawer replace the amount within 15 days from the receipt of the notice, no criminal offense is committed by the drawer.
