A cheque bounce case thus defines any action in court where a cheque was paid pursuant to a crossed cheque and the drawee bank returned the cheque claiming that it has been bounced.
1. Reasons for a Cheque Bounce
Not having sufficient Funds: The account holder does not have sufficient balance to clear the cheque.
Signature Mismatched: The signature contained in the cheque is not matched as per the record maintained by the bank of the account holder signature.
Account is Blocked or closed: If the account of the cheque drawer is closed before issuing the cheque
Time Period: When a cheque contains a future date or When the cheque is presented in the bank after six months of issuing the cheque.
2. Legal Framework
According to Section 138 of Negotiable Instruments Act if the cheque has been dishonoured on any of the reasons such as, insufficient funds in the account, the account was closed or for any other lawful reason it whichever way it carried the tone of a criminal offence for the drawer.
Dishonour Notice: If the cheque gets dishonoured, the payee must give legal notice to the drawer within 30 days. This notice allows the drawer fifteen days to make the cheque amount good.
Filing a Case: In the case where the drawer has not made the payment in the as aforementioned a criminal case can be reported to the payee under section 138 of the Negotiable Instruments Act within a period of one month from the notice.
3. Writ Shown in a Cheque Bounce Case
Cheque Bounce: The cheque is given to the bank and is later bounced through such circumstances as lack of funds or whatever.
Issuance of Notice: If the payee does not receive full payment from the drawer, he gives the drawer a legal notice of payment demanding payment within 15 days.
Filing a Complaint: Failing to make payment within 15 days of the notice, a complaint is lodged to the right court, often the Magistrate Court.
Court Proceedings: In some cases, the court will then issue a summons directing the drawer to answer to trial. If the drawer is convicted, then the latter is liable for fines (dub of cheque amount) or imprisonment up to two years or both.
4. Forgetting the basic facts of the case is one of the worst mistakes that one can ever make in a cheque bounce case.
Cheque Was Stolen or Forged: The accused may defend herself or himself on grounds that the cheque was intercepted and cashed by a third party, or the cheque was counterfeit.
Agreement Between Parties: The drawer may defend himself by pointing out that the situation had a legal basis in that the non-payment was made by mutual agreement between the parties.
Technical Defects: The accused may object that the legal notice was never provided or the procedure which has been followed by the payee has some technical faults.
5. Punishments for Cheque Bounce
Fines: The court may impose a fine to the amount which may be doubled the value of the cheque.
Imprisonment: The drawer can be imprisoned for up to 2 years.
Both Fine and Imprisonment: At times the court may impose both a fine and imprisonment as the degree of punishment that serves a defendant.
6. Time Limit for Filing a Case
This legal notice must be sent within thirty days from the date the cheque was returned unleashed.
A complaint must be made within 1 month of the elapse of the 15 days’ notice.
7. Recent Changes and Updates
Negotiable Instruments (Amendment) Act, 2018: It is to be noted, some changes have been made through the operation of the Act, some of peculiarities as allowing the cases to be brought in the jurisdiction where the cheque was presented or where the bank is situated that has made convenience to the complainants.
8. Bail and Compensation
Bail: As a rule, the accused has the right for the release during the trial if all conditions are met.
Compensation: From time to time the drawer could be required to indemnify the payee for other miscellaneous actual damages in conjunction with the face value of the cheque as per the extent of the case.
Conclusion
Cheque bounce is also a Criminal offence and there are other consequences to the drawer of the cheque. It must be followed by the drawer and the payee and suitable legal action should be pursued as early as possible.
If you want to know more about the governing law, here is the link to The Negotiable Instrument Act,1881.