Whenever it comes to money transaction. Then it is either cash transaction or thru cheque. Just as the times changed, the way of doing business in the society also changed. As per the negotiable instrument act 1881 u/s 138, a cheque bounce is a wrongdoing, and the consequence of cheque bounce effect it is punishable with fine up to double the amount of cheque or lead to behind the bar for not more than two years or both.
The cheque bounce is happened when the payee deposits at bank and it is unpaid due to insufficient funds and cheque is returned. Cheque bounce effect is a serious effect now-a-days as sometimes cheque is dishonored due to some specified reasons. There may be several reasons for cheque bounce, but it will be an offence when there are insufficient funds at drawer’s account.
The bank returns it with a memo of reasons stated in sufficient funds. The payee can issue a cheque bounce notice to the drawer to pay the mentioned amount.
New Rules of Cheque Bounce
As per the RBI notice in August 2021, customers who are using mostly cheques will have to maintain the minimum balance and have to pay a penalty fee on cheque bounce, applicable to all national and private banks. The above rule was made to make the clearing of cheques smoother and faster. Besides, the RBI also announced that the National Automated Clearing House (NACH) would be operational 24/7 all days of week including Sunday.
Circumstances of Cheque Bounce
The various situations that result in cheque bounce are as follows:
- Inadequate account balance – If there is not much balance in the drawer’s account to pay the cheque amount, the bank will reject and return the cheque to the payee with a memo stating insufficient funds to pay the amount.
- Invalid cheque – Cheque must be presented within three months of issuance by drawer. The cheque expires if it is not presented to the bank within three months. If the expired cheque is given to the bank, it bounces.
- Overwriting – The cheque bounces if drawer has overwritten on signature or on amount or any other
- Damaged cheque – if the cheque is damaged or disfigured or invisible or have stains then the cheque will bounce.
- Signature mismatch – The cheque will be bounced if the drawer’s signature is unclear or absent or does not match with bank’s record.
- Mismatch of numeric amounts and written words- The cheque will bounce in case of mismatch of numerical figures and written in words figure.
Remedies Against Cheque Bounce
Resubmission of cheque
When the cheque bounces due to above mentioned reasons the payee can ask the drawer for another one. The payee can file a case in case the drawer is unwilling to pay another correct cheque.
Cheque Bounce Notice u/s 138 of the Negotiable Instruments Act
The cheque bounce notice can only be issued in case of the reason is for insufficient funds, in other circumstances no notice is issued.
Issuance of Cheque Bounce Notice
The payee can issue a cheque bounce notice within thirty (30) days of an intimation sent by the bank. The payee must give fifteen(15) days time period from receipt of notice, failing which will initiate a legal action within 30 days of the expiry of 15 days.
If the cheque was issued as a donation or gift, then a cheque bounce notice cannot be served.
When the cheque bounces, the creditor gets the cheque back. Then the creditor to recover the amount from the debtor on the date on which the cheque is bounced in the bank. It is necessary to send a legal demand notice to the debtor through Vakil within 30 days from that day. This can be done by sending the Legal Demand Notice through Speed Post or R.P.A.D. That is, registered Post Acknowledgment can also be sent by Due or through Courier Service.
What should be written in the legal notice?
- In the legal notice, it should be written that what was the deal between the creditor and the debtor. And why was the deal done?
- The transaction should be a matter of money transaction.
- There should be talks about giving a cheque by the debtor to the creditor in return for money.
- The name of the creditor, the amount which was settled, the amount should be written on the top of the cheque.
- The date on which the cheque is to be deposited in the bank should be mentioned.
- The cheque should be signed by the debtor.
- The transaction made by the creditor by accepting the cheque should be completed.
Procedure to Follow After Issuance of a Cheque Bounce Notice
After fifteen days of issuance of cheque bounce notice, the payee can file a legal case and complain before the magistrate within 30 days of the expiry of notice. The payee can file the complaint giving the pariculars such as place of cheque issue, bank name presented for payment, name of bank dishonoured by.
FAQs
How much is the penalty charge for cheque bounce?
The penalty charges for Cheque bounce may vary from banks to banks ranging from Rs 50 to Rs 750.
Can one file an FIR for a cheque bounce?
Yes, one can file an FIR against the drawer (person who has issued a cheque). A person can then file a case against the issuer of the cheque u/s 420 or u/s 406 of the Indian Penal Code (IPC) in a criminal court. Alternatively, the payee can directly file a complaint before the Magistrate u/s 138 of the Negotiable Instruments Act, 188.
Is it a crime of issuing a cheque and it is bounced?
Yes. If a cheque is bounced for inadequate funds in the bank account, it is a criminal misdeed. The payee can file a criminal complaint u/s 138 of the Negotiable Instruments Act, 1881 and the drawer of the cheque can be behind the bar.
Can one be arrested in a cheque bounce case?
Yes, one can be arrested if the cheque issued by you bounces for the reason of insufficient funds in the account since it is a criminal offence. However, it is a bailable offence. Thus, one can get bail if one assures one’s presence in court when demanded.
What is the bail amount for the cheque bounce case?
The bail amount is not fixed and it varies from case to case. The no of similar cases pending against the drawer, the amount mentioned in cheque, the financial status of the drawer affect the bail amount.
What is a memo for cheque return?
In case of dishonour of cheque, bank issues a memo by writing the reason for dishonor. It is a required document for issuing a cheque bounce notice .
What are the documents essential for filing a cheque bounce case in India?
- Notice served on the drawer.
- Proof of sending of notice (courier receipt or registered post receipt).
- Original cheque .
- Cheque return memo from the bank.
- Proof that drawer has taken or liable to pay the amount to the payee.