Check Bounce Law
DISHONOR OF CHEQUE or CHEQUE BOUNCE occurs when
a cheque, presented in the bank is returned unpaid. It could occur due to insufficient funds in the bank account of the person who has issued the cheque or the signature on the cheque is not matching with the original signature of that person. You can proceed against the person who has issued such a cheque under various provisions of law. The most important useful provision to consider is Section 138 of The Negotiable Instruments Act.
Important things to keep in mind:
The first step to take in a cheque bounce case is to send a demand letter or legal notice to the person who has issued the cheque also called as ‘drawer’. The demand notice can either be drafted by the aggrieved person himself or he can also take help from a lawyer to draft the same. A demand notice should be sent within 30 days from the date on which the receipt of cheque bounce is given by the bank to which the cheque is presented. However, if the drawer does not pay the amount within the stipulated period of 15 days from the date on which the legal notice is sent to him, then the aggrieved person could even file a cheque bounce case against the drawer.
Documents required for filing a cheque bounce case:
1) Original cheque and return memo
2) Copy of notice and original postal receipts.
3) Evidence affidavit.
Where cheque bounce, case is filed?
There has been quite some debate regarding the area of jurisdiction of a cheque bounce case, but recent Supreme Court rulings have clarified the issue. The cheque bounce case should be filed in the area where the cheque was submitted by you, to be honored.
Who can file a cheque bounce case?
Ordinarily, the payee of the cheque files the cheque bounce case. In special cases, the case can also be filed through a power of attorney. It is important to note that it is mandatory for the complainant to appear before the magistrate and examined under oath.
What is a material alteration?
Changing the amount of the cheque, changing the name of the payee (the person to whom the check is given), or making other changes on the cheque, such as the date or the name of the drawee (the person from whose bank account the cheque is withdrawing funds) or paying bank can be considered as material alteration. If the cheque is dishonored due to material alterations on the cheque, then you are not entitled to file a cheque bounce case.
How do I defend against a frivolous cheque bounce case?
In certain business transactions, cheques are used as a method for payment of money or as a security. However, there have been instances where after the completion of the business transaction, the person tries to fraudulently encash the cheque and subsequently files a false complaint in the court. Hence, the manner to defend a frivolous cheque bounce case is to show that there was no legal subsistence debt at the time the cheque was issued. Hence,
you will have to show that the cheque was given as a way of security and no debt existed at that point of time.
Case against companies and firms:
If you want to file a cheque bounce case against your company or firm, the people you can file the cheque bounce case against are the directors and/or partners of the company or firm. You could even file a cheque bounce case against the firm or company.
Alternate remedies:
Generally, a civil suit for recovery of money is filed in a cheque bounce case. In serious cases where the cheque amount is big and cases where applicable, a criminal complaint for cheating could also be filed under section 420 of the Indian Penal Code (IPC). more
a cheque, presented in the bank is returned unpaid. It could occur due to insufficient funds in the bank account of the person who has issued the cheque or the signature on the cheque is not matching with the original signature of that person. You can proceed against the person who has issued such a cheque under various provisions of law. The most important useful provision to consider is Section 138 of The Negotiable Instruments Act.
Important things to keep in mind:
The first step to take in a cheque bounce case is to send a demand letter or legal notice to the person who has issued the cheque also called as ‘drawer’. The demand notice can either be drafted by the aggrieved person himself or he can also take help from a lawyer to draft the same. A demand notice should be sent within 30 days from the date on which the receipt of cheque bounce is given by the bank to which the cheque is presented. However, if the drawer does not pay the amount within the stipulated period of 15 days from the date on which the legal notice is sent to him, then the aggrieved person could even file a cheque bounce case against the drawer.
Documents required for filing a cheque bounce case:
1) Original cheque and return memo
2) Copy of notice and original postal receipts.
3) Evidence affidavit.
Where cheque bounce, case is filed?
There has been quite some debate regarding the area of jurisdiction of a cheque bounce case, but recent Supreme Court rulings have clarified the issue. The cheque bounce case should be filed in the area where the cheque was submitted by you, to be honored.
Who can file a cheque bounce case?
Ordinarily, the payee of the cheque files the cheque bounce case. In special cases, the case can also be filed through a power of attorney. It is important to note that it is mandatory for the complainant to appear before the magistrate and examined under oath.
What is a material alteration?
Changing the amount of the cheque, changing the name of the payee (the person to whom the check is given), or making other changes on the cheque, such as the date or the name of the drawee (the person from whose bank account the cheque is withdrawing funds) or paying bank can be considered as material alteration. If the cheque is dishonored due to material alterations on the cheque, then you are not entitled to file a cheque bounce case.
How do I defend against a frivolous cheque bounce case?
In certain business transactions, cheques are used as a method for payment of money or as a security. However, there have been instances where after the completion of the business transaction, the person tries to fraudulently encash the cheque and subsequently files a false complaint in the court. Hence, the manner to defend a frivolous cheque bounce case is to show that there was no legal subsistence debt at the time the cheque was issued. Hence,
you will have to show that the cheque was given as a way of security and no debt existed at that point of time.
Case against companies and firms:
If you want to file a cheque bounce case against your company or firm, the people you can file the cheque bounce case against are the directors and/or partners of the company or firm. You could even file a cheque bounce case against the firm or company.
Alternate remedies:
Generally, a civil suit for recovery of money is filed in a cheque bounce case. In serious cases where the cheque amount is big and cases where applicable, a criminal complaint for cheating could also be filed under section 420 of the Indian Penal Code (IPC). more
Viewed by 2500
View all 23 comments Below 23 comments
Section 138 of the Negotiable Instruments Act provide for the payee (in whose favour a cheque is drawn) of a cheque to proceed against the drawer (who draw(issue) the cheque) thereof criminally, if the said cheque is returned (bounced back) unpaid for want of sufficient balance in the relative account of the drawer in the bank or the amount exceeds the prescribed limit or the arrangement(s) with the bank. Section 138 of the N I Act deals with only the cheques bounced due to insufficient fund in the relative account. more
Nov 10
OK. The rule is revised, but does the time taken for disposal of the case is modified. A big no. It should be disposed off within 15 days or after one hearing. more
Nov 03
Cheque bounce can also take place, when: 1) defective date, e.g. writing 30/02/2018 or 31/11/2018, expired date or post-dated 2) mismatch between the amount in words and amount in figures (it seems RBI directive is to prevail on the amount written in words) - but who cares: 3) defacing, even partially, with extraneous ink (stamp pad ink or some other liquid) , etc I had written a few days' back, that such problems had arisen in PSU/PSE banks , because of their dereliction in duties in receipt of cheques and cheque drop box culture. Earlier, it was the norm to receive the cheuesby a staff, who used to exercise such 'checks'. Contemporary culture has been to evade this responsibility. You need to go to the Bank Manager to get a receipt , who, while providing the receipt would give a sermon - about embracing modernisation, reposing trust, etc. etc. However, in most Private Sector banks - dropping cheues in drop box is only an option, particularly i non-working hours. In many private banks, cheque drop boxes are not available inside their offices. more
Oct 28
I have another experience..One of my cheques was dishonoured even though I had sufficient balance, signature matching but the private bank stopped the cheque because they did not update their records of the documents submitted to them some months back..I proved them wrong , insisted on withdrawing the amount then and there even though the bank was giving excuses ( on document updation would take time and to be done by back office, branch i/c was not available in the branch etc...).I got my money and walked out with cash..If you are right be firm and demand service from the bank.. more
Oct 28
