What to Do If Your Cheque Bounces: Legal Steps and Remedies

What to Do When Your Check Bounces: Measures and Remedies under Law

When a cheque bounces, it runs to serious legal action in India. Therefore, if your cheque is dishonored, the first rigorous legal action should be taken immediately without postponement. The article provides all the required steps, types of cheque bounce cases, legal provisions, required documents, and how an expert cheque bounce lawyer in Delhi can help you.

What Is Called Cheque Bounce?

When a bank fails to make a payment against a cheque due to reasons such as insufficiency of funds, signatures not matching, expired validity of the cheque, etc., that incident is called cheque bouncing. In India, cheque bounce cases are covered under Section 138 of the Negotiable Instruments Act of 1881.

Reasons Cheque Bounces

• Insufficient funds: The account holder does not have balance enough for the transaction.

• Signature mismatch: For example, the drawer's signature does not match with that in the bank records.

• Post-dated cheque: The cheque was presented before its due date.

• Account closure: The drawer's account has been closed.

• Stop payment order: The issuer has instructed the bank not to proceed with the cheque.

• Overwriting or Damage: Any unauthorized alteration or damage makes the cheque invalid.

Legal Provisions Under Indian Law

According to Section 138 of the Negotiable Instruments Act of 1881, bouncing cheques is a criminal offence in India. In addition, other forms of punishment specified in the Indian Penal Code (IPC), 1860 may be invoked against the offender for these crimes, such as fraud and dishonesty.

Punishment for Cheque Bounce in India

• Imprisonment for a term which may extend to two years

• Fine which under Section 138 shall not exceed twice the cheque amount

• A civil suit for recovery of the amount along with interest

What to Do If Your Cheque Bounces

Step 1: Collect Evidence of Dishonored Cheque

• Obtain the bank cheque return memo.

• Keep a copy of the dishonored cheque.

Step 2: Send a Legal Notice

• If the cheque gets dishonored, sending a legal notice must be done within 30 days.

• The notice will give the other person 15 days to make payment.

• The notice must include details of cheque number, amount, reason for dishonor, and demand for payment.

Step 3: File a Case in Court

• If the person fails to make payment within 15 days, then a complaint must be filed in the court within 30 days.

• The case is registered under the Negotiable Instruments Act, Section 138.

Step 4: Presence in Court

• The accused has to be summoned, and the legal proceedings should begin.

• Penalties would be levied upon being found guilty.

Step 5: Execution of Order

• Imprisonment, fine, or compensation would be the penalty inflicted by the court.

• If the accused does not comply, further legal actions will be initiated.

Types of Cheque Bounce Cases

1. Personal loan cheque bounce: Check bounce by personal loan payment.

2. Cheque bounces due to business transaction: Cheque bounces for a business transaction.

3. Salary cheque: A bounced cheque from the employer.

4. Rent cheque bounce: A tenant's rent cheque has been dishonored.

5. Property transaction cheque bounce: The cheque bounces from property purchase.

Documents Needed for Cheque Bounce Case

• Original bounced cheque

• The cheque return memo from the bank

• Copy of legal notice sent to the issuer

• Postal receipt of legal notice dispatch

• Bank statement showing insufficient funds

• Agreement, invoice, or contract related to the cheque

• Depositions of witnesses (if any)

FAQs on Cheque Bounce Cases

1. What is the time limit to file a cheque bounce case?

The notice must be sent within 30 days of the dishonor of the cheque; thereafter, a case can be filed within another 30 days if payment is not forthcoming.

2. Can I settle a cheque bounce case outside of court?

Yes, settlement is possible between both parties before or during court proceedings.

3. Would I be arrested if I bounced a cheque?

A maximum of 2 years' imprisonment can be awarded upon proving guilt in the court.

4. How much time does a cheque bounce case take to resolve?

This may take about six months to two years, depending on how complicated the case is.

5. What happens if I ignore a cheque bounce notice?

Non-response may lead to a court summons, fine, or arrest warrant.

6. Can I get back my cheque amount along with interest?

Yes, interest along with the cheque amount can be claimed.