A cheque is a convenient negotiable instrument. When a cheque is presented to the bank for its payment, but due to the insufficiency of funds it is returned back to the drawer, then in that case, a cheque becomes a bounced cheque. The reason for its return is their being a defect in it. On defining this defect, we mean that the amount present in the cheque exceeds the amount present in the bank account of the drawer. Dishonor of cheque is a criminal offence.

Jail in Cheque Bounce Cases
Jail in Cheque Bounce Cases

In case if a person (individual) deposits a bounced cheque in the bank, then he must immediately send a demand notice to the drawer i.e. the party who wrote the cheque directing him to repay the amount failing to which proceedings would be started against the drawer u/s 138 of the Negotiable Instruments Act 1881. But, the managing director of the company would be held liable and be prosecuted in case it’s a company. Many times, there are chances of settlement due to the fear of the threat of proceedings against the drawer. Thus, this demand notice needs to be sent to the drawer within 30 days from the date one knew that the issued cheque is bounced. And then the payment is to be made within next 15 days failing to which the drawer would be prosecuted. Usually, a lawyer is not required for sending this demand notice, however, getting it examined by the lawyer could be quite beneficial. The notice can be sent by a speed post.

On the last day of payment, i.e. the 15th day, if the payment is not made by the drawer then the aggrieved party possess the power to file a complaint before a magistrate with no delay more than a period of 30 days in any of the following places:

  1. Where the cheque was drawn
  2. Where the cheque was returned by the bank
  3. Where the cheque was presented
  4. Where the demand notice was served

When the court receives a complaint regarding cheque bounce, along with all the necessary documents then, the case is initiated. Further, if the drawer of the cheque is found to commit an offence, then according to section 138 of the Negotiable Instruments Act, 1881, he/she (drawer) is imprisoned with a term of two years along with a penalty of twice the amount of the cheque.Additionally, according to the RBI guidelines, the bank possess the right to close the drawer’s account if found guilty and even stop issuing him the cheque book. The bank can also charge a penalty for squandering the bank’s precious time and for additional paperwork.

Following are some reasons where bank possesses the power to dishonor the cheque:

  1. Insufficiency of funds in the drawee’s bank account
  2. A Discrepancy in the account number
  3. Discrepancy in signatures
  4. Discrepancy in numbers or words of the cheque
  5. An expired cheque
  6. In case the drawer of the cheque is dead or becomes insane
  7. A damaged cheque
  8. The account of the drawer is permanently closed
  9. Exceeding the limit of the overdraft

Following are some of the conditions which are to be fulfilled so as to apply the provisions of section 138 of the Negotiable Instruments Act, 1881:

  1. There must be dishonor of cheque due to insufficiency of funds in the drawer’s bank account.
  2. The cheque should have been drawn by the drawer on his account or an account maintained by him.
  3. The cheque must have been issued in order to discharge his legal liability.

For case specific advice, one can connect with Top Cheque bounce Criminal Lawyer practicing in Trial Courts of Chandigarh Panchkula Mohali Derabassi Kharar.

This post is written by Yashika Kapoor. For more info, dial 99888-17966