Dishonour of check or check bounce happens when a watch that is introduced in the bank is returned unpaid. Check Bounce could happen due to insufficient funds in the bank record of the individual who gave the check or if the marks on the check don't coordinate with the first signature of that individual. You can proceed against the individual who has given such a cheque under different arrangements of law. The most significant and valuable arrangement to consider is Section 138 of The Negotiable Instruments Act.
Important things to keep in mind
The first step that must be taken in a cheque bounce case is to send a demand letter or legal notice to the person who has issued the cheque also called 'drawer'. You must take help from a lawyer to draft the legal notice. The legal notice must be sent within 30 days from the date on which the receipt of cheque bounce is given by the bank. 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 can file a cheque bounce case against the drawer in such a situation.
Documents Required:
The following documents are required before filing a cheque bounce case :
1) Original cheque and return memo
2) Copy of notice and original postal receipts.
3) Evidence affidavit.
Disadvantages of a cheque bounce
Penalty by the bank: If your check happens to skip because of inadequate assets or some other specialized explanation like mark bungle, both the defaulter and the payee are charged by their separate banks. In the event that the ricocheted check is against the reimbursement of any advance, you would need to also endure the late installment charges (which change from Rs 200 to Rs 700) alongside the punishment expense charges by the bank.
"The punishment charges for check outward return are near Rs 300 for most banks, while charges for check internal return are about Rs 100. The specific punishment accuses change of banks and are distinctive for various record types. Premium records ordinarily have higher punishment charges,"
Negative Impact on your CIBIL score: A bobbed check can imprint your money related record. Indeed, even a solitary ricochet can affect your CIBIL score hopelessly to such a degree, that you can be denied an advance later on. The most ideal approach to keep your CIBIL score solid is to ensure your checks are rarely shamed and that there would be at any rate a couple thousand more than the base parity for your record considerably after the check is encased.
Filling of civil and criminal charges by the bothered party: If you are fortunate, you can pull off just a little fine paid to the bank for a bobbed check. Then again, if your stars are adjusted against you, the oppressed party that doesn't get the guaranteed assets can document a common or criminal body of evidence against you as a guarantor of the check.
"On the off chance that the check disrespect is wilful, the defaulter can be indicted under Section 138 of Negotiable Instruments Act, 1881 or Sec 417 and 420 of the Indian Penal Code (IPC) 1960. Under Section 138, the abused party may send you a legitimate notification first. On the off chance that you are seen as blameworthy as a wilful defaulter, you can be rebuffed with a jail term of two years and additionally a fine as high as double the check sum," educates Shetty.
Under Sec 417 and 420, a non-bailable quick warrant can be given. Be that as it may, in both the cases, an instance of cheating must be demonstrated. In the event that more than 1 check is skiped, the payee can record separate suits against each disrespected check, which can compound issues for the defaulter.
The payee, be that as it may, can't straight away go the lawful way. "He can re-present the returned check inside 3 months from the date of the check, giving another opportunity to the backer. In the event that it is restored the second time as well, at that point he can go the legitimate path inside 30 days of the receipt of Check Return Memo. On receipt of a lawful notification or request, the defaulter can settle the installment genially out of the court whenever or continue with a legal counselor for hearing, at the court where the grumbling has been enlisted," says Shetty.
Other Risks: according to the RBI rules, banks can quit giving check book offices to any client reserved for rehashed check ricochet offense at any rate multiple times on checks esteemed at over Rs 1 crore. On the off chance that you have saved any guarantee security with the bank for any credit and if reimbursement EMI check ricochets, the banks are well inside their entitlement to give a lawful notification or deduct cash from your record.
"Other than deficient assets, check disrespects can occur in the event of mark crisscross of the cabinet on the check according to the bank's records. Overwriting on checks without confirmation and issuance of watches that have terminated legitimacy are likewise purposes behind check bob. Be that as it may, lawful help can be taken just if an away from of cheating can be demonstrated. Lawful course can't be embraced if the gave check is against a gift or blessing,"
No compelling reason to state that consistently ensure that all the checks gave by you are respected on schedule. In the event that you happen to debilitate the cash in your record before the check date, advise the payee about it through composition and issue stop installment/wiping out at your bank, or mix adequate assets into your record before the date of the check. Likewise, don't give a non-account payee check or a check without intersection it so as to maintain a strategic distance from the instances of fraud.
When & Why Does Cheque Bounce Happen?
Cheque Bounce is also known as dishonour of cheque, which has specific reasons for it to happen. The are 8 reasons why you are susceptible to have a cheque bounce or receive a legal notice for it, such as:
When Cheque Bounce Notice Can Be Issued
To issue a cheque bounce notice and get legal recourse, the following conditions must be satisfied:
The following steps must be followed to issue a cheque bounce notice and take legal action:
Cheque bounce notice must be issued by the payee to the defaulter, within 30 days of dishonour of cheque, by registered post (or Speed Post) acknowledgement due. The cheque bounce notice must be proper format, with information like nature of transaction, amount, date of cheque deposit, date of cheque bounce, reason for cheque bounce and request to make payment within 15 days.
If the cheque defaulter fails to make payment within 15 days of cheque bounce notice, the payee should file a criminal case in a court within 30 days from the expiry of notice period of 15 days. Cheque bounce complaints must be filed in a court in the city where the cheque was presented.
Once the case is filed, the court will hear the case and issue summons under Section 138 of the Negotiable Instruments Act.
The cheque defaulter would then have to submit surety and appear before the Court for resolution of the matter.
Section 138 of Negotiable Instruments Act
138. Dishonour of cheque for insufficiency, etc., of funds in the account.
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 extend to one year, or with fine which may extend to twice the amount of the cheque, or with both: Provided that nothing contained in this section shall apply unless:
The cheque has been, presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier;
The payee or the holder in due course of the cheque as the case may be, makes a demand for the payment of the said amount of money by giving a notice, in writing, to the drawer of the cheque, within fifteen days of the receipt of information by him from the bank regarding the return of the cheque as unpaid; and
The drawer of such cheque fails to make the payment of the said amount of money to the payee or, as the case may be, to the holder in due course of the cheque, within fifteen days of the receipt of the said notice. Explanation.-For the purposes of this section, “debt or other liability” means a legally enforceable debt or other liability.
Explanation: For the purposes of Section 138 of Negotiable Instruments Act, “debt or other liability” means a legally enforceable debt or other liability.
Section 141 of Negotiable Instruments Act – For Companies
242. Offences by companies.
If the person committing an offence under section 138 is a company, every person who, at the time the offence was committed, was in charge of, and was responsible to, the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly: Provided that nothing contained in this sub-section shall render any person liable to punishment if he proves that the offence was committed without his knowledge, or that he had exercised all due diligence to prevent the commission of such offence.
Where any offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to, any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly.
Replying to a legal notice is important since legal notice is an official document sent with respect to taking a legal action against a person for non-payment of the cheque amount.
In most cases, before taking any legal notice you are advised to consult a legal expert. When you receive a legal notice, you have two options;
Although, it is not compulsory by law to provide a reply to it, however, it is advisable to seek a legal expert and honour the legal formalities concerned with a fitting reply.
Any legal notice for dishonour of cheque provides a time limit within which a reply has to be sent.
For that, you can carefully read the legal notice, so as to understand what exactly has to be written before sending a reply to the legal notice.
There is no set legal notice format for cheque bounce for sending a good reply, but if you choose to reply to the legal notice, then make sure that the following listed information is clearly laid out, such as:
It is necessary to hire a lawyer for sending a reply to a legal notice, in order to avoid any mistakes.
A lawyer with good skills of drafting legal notice can collect the information from you and send a befitting reply to the legal notice on your behalf.
One thing to keep in mind is that the reply to any legal notice must be sent on the letterhead of a lawyer.
