Consequences of Cheque Bounce Notice

A cheque is said to have bounced when the payee delivers it to the bank for payment, and the bank returns it as unpaid because of insufficient funds. According to Section 138 of the Negotiable Instruments Act (NIA) of 1881, a bounced cheque is punishable by a fine of up to double the cheque's value, up to two years in prison, or both.

What is a Cheque Bounce Notice?

A cheque bounce notice is a legal warning sent to the issuer of a bounced cheque to demand payment. It's issued under Section 138 of the Negotiable Instruments Act of 1881 when a cheque bounces due to insufficient funds in the issuer's account. The individuals receive the notice within 30 days of the cheque bouncing, and the drawer has 15 days to make payment after receiving it. If the drawer doesn't pay within that time, the payee can file a criminal complaint in court.

How to Know a Cheque Has Bounced?

If a cheque bounces, the bank will message your registered mobile number. It will also issue a cheque return memo to the payee's banker, which will include the reason for the bounce, the date of the bounce, the cheque number, and the date it was issued.

In India, a bounced cheque is considered illegal and a criminal offence. The issuer may be liable to pay penalties, and the bank may take legal action. The offended party may legally pursue the defaulter by issuing a legal notification within 30 days of receiving the cheque return memo.

What are the Circumstances of the Cheque Bounce?

A cheque can bounce for various reasons, including:

• Insufficient funds: The payer's bank account doesn't have enough money to cover the cheque.
• Signature mismatch: The signature on the cheque doesn't match the one on file with the bank.
• Incorrect date: The cheque has the wrong date.
• Damaged cheque: The cheque is disfigured or damaged, making the details hard to see
• Overwritten cheque: The cheque amount, issuer's signature, or other statement has been overwritten.
• Account number mismatch: The account numbers on the cheque don't match.
• Amount mismatch. The amount written in words and figures on the cheque doesn't match.
• The cheque has expired.

What are the Legal Actions for Cheque Bounce?

If a cheque bounces due to insufficient funds, the drawer can be held criminally liable under Section 138 of the Negotiable Instruments Act. The drawer can be punished with a fine of up to twice the cheque amount, imprisonment for up to two years, or both. The court can also sue the drawer for the amount on the cheque.

How to Prosecute a Case of Bounced Cheque?

In this cheque bounce case procedure, defence evidence includes any facts or documents you submit to refute the complainant's allegations and demonstrate your innocence. It may include:

• Documents demonstrating funding: Bank statements or passbooks prove adequate funds were in your account when the cheque was presented.
• Proof of stop payment instruction: Documentation indicating that you issued a stop payment order before the cheque is presented.
• Evidence of Technical Error: Statements or records indicating a bank mistake or technological problem that hampered the transaction.
• Proof of mistaken identification: Documents proving that the cheque belongs to someone else with a similar name or a probable instance of mistaken identity.
• Witness testimony is statements from those who can confirm your version of events or support your defence arguments.

Punishment and Penalty for a Bounced Cheque

Bouncing a cheque is a punishable crime. The cheque bounce penalty is up to double the value of the cheque or imprisonment for up to two years. The payee may sue the payer or allow the payer to reissue a cheque within three months.

Banks also charge cheque bounce penalties for dishonouring a cheque, which varies from bank to bank. The act states that if a cheque drawn by the accused on an account maintained by them in a bank for the discharge of debt or liability is returned unpaid due to insufficient funds or because the amount exceeds the agreement with the bank, the drawer is deemed to have committed an offence under this act.

Section 144 of the Negotiable Instruments Act

The Negotiable Instruments Act allows a magistrate to serve summons to a witness or accused by registered post. The summons can be sent to the accused's or witness's residence or business. However, a summons to an accused must be presented in person, and the accused must provide a signed response or an endorsement from the postal department or courier service.

How to Respond to a Cheque Bounce Case?

In India, if you receive a legal notice for a cheque bounce, you must respond within 15 days. Your response should include:

• Your name, address, and description
• The date the cheque was issued
• The cheque return memo
• A rebuttal of the allegations made against you
• The reason for the cheque dishonour
• A proposed solution, such as a request for more time to pay or alternative dispute resolution
• A cheque for the same amount as the previous cheque made out to the payee

If the complainant files a case against you, you should hire a lawyer and file a reply in court. You'll need to present your case and evidence, such as the original cheque, bank records, and any relevant correspondence in court. You should also be prepared for cross-examination by the defence lawyer. Ensure you know all about the cheque bounce punishment, as mentioned above.
 

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