In this article, Kajal Srivastava discusses Dos and Don’ts in a cheque bounce case.

What do we mean by the term cheque?

A cheque is basically a negotiable instrument which directs the bank to pay some specific monetary amount from a person’s account in whose name the cheque has been issued.

The following prerequisites are required to be satisfied for qualifying a cheque as a valid-

• It must be in written form
• It should be an unconditional order
• The mode of payment should be directed to some specific person
• It should be payable on demand for some specific amount of money
• The cheque must contain the signature of the drawer.    

What is a cheque bounce?

The occurrence of an event when a person draws a cheque in the favor of another person without maintaining sufficient amount in his account as a result of which the bank has to return the cheque, which is termed as bouncing or dishonoring of the cheque.

Legal provision for cheque bounce in India

The legal provision regarding bouncing of the cheque has been mentioned under Section 138 of the Negotiable Instruments Act, 1881. This Act says that bouncing of a cheque is a criminal offense in India and the same is punishable with an imprisonment of two years or with a fine equivalent to twice the amount of cheque, or with both.

Offenses by the companies

Section 141 of the Negotiable instrument Act states that if the offense under Section 138 has been committed by a company, then along with the company every single individual who was involved in the discharge of liability will be responsible for the guilty of an offense.

Essential ingredients for  the offense of cheque bouncing

• The issue of cheque must have been made for the purpose of fulfilling some legally enforceable debt or any other liability.
• It must have been presented either within a period of six months or within the period of its validity whichever is earlier.
• The payee is obligated to issue a demand notice in writing to the drawer within a duration of 30 days regarding the nonpayment of the cheque by the bank.
• The drawer must fail to pay the amount to the payee within a duration of 15 days from the date of receiving the above mentioned period.

Who can file a complaint about dishonoring the cheque?

The person whose cheque has been dishonored by the bank due to the insufficiency of the funds has a right to file the complaint.

What are the Dos in case of a cheque bounce   

• Furnishing of cheque- The first and the foremost thing which is required to be done is the furnishing of cheque within the validity period of three months from the date on which it is drawn, it is to be noted that prior to this the period of validity was 6 months which has now been reduced to three months furthermore a cheque  be presented for more than once within the period of validity.
• Notice of demand- When the event of bouncing the Cheque by the Bank occurs immediately a Notice of Demand should be sent to the Drawer. The Time Limit for Furnishing the Notice Of Demand to the Drawer is thirty days.
• The Drawer should pay the amount within fifteen Days to the aggrieved Party.However, this can not be denied that there is no prescribed format for such Notice but still the Drawer is deemed to consider this as “Notice of Demand”.Moreover, the aggrieved Party should have the Proof that they Furnished the Notice Of Demand to the Drawer.
• The Notice of Demand can be send by the complainant himself/herself       but it is advisable that they should get the approval of a Cheque Bounce  Lawyer before communicating the same to the Concerned Party.

Necessary ingredients of a Demand Notice

• Statement that the Cheque was Presented to the Drawer before the expiry of its validity.
• Statement that there was a Legal Liability which Could be Imposed to the Drawer.
• The Notice of Communication Regarding the Dishonour of Cheque as given by the Bank.
• Notice of Demand Directing the issuer to pay the amount within 15 days.

The payee is supposed to send the notice to the accountholder within 30 days of bouncing the cheque,the notice should contain the demand for the payment within fifteen days from the date of drawing the notice,it is to be noted that violation of the same will cause proceedings against the drawer under the provisions of Negotiable Instruments Act 1881.

Essential documents for filing the complaint

• The original cheque.
• The memo of returning the cheque which would contain the reason about  non payment by the bank.
• Blueprint of notice of demand  and the original receipts of the  portal.
• An affidavit stating the pieces of evidence

Filing of complaint- After the lapse of 15 days, from the date of drawing the notice the payee has to file the complaint within the duration of 30 days before the magistrate.

Jurisdiction for filing the complaint

• The place where the cheque was drawn
• The place where the cheque was presented.
• The place where the cheque was returned by the bank.
• Where the notice of demand has been served.
• The next step is to have the trial, as per the provisions of Section 138 of the Negotiable Instruments Act the Court will take into account the documents produced by the complainant and the same will act as the evidence.
• The Court will reach upon the verdict taking into account the merits of the case, and if the accused is proved to be guilty then he will be punished with an imprisonment of two years and the amount which is equivalent twice to the amount of the cheque.

Court fees for filing of complaint

• The court issues summons to the accused of appearing in the court on the specified date.
• If the accused does not appears on the prescribed date to the court for the hearing then the court issues a bailable warrant on the request of the complainant.
• Even after the issuance of the bailable warrant if the accused fails to appear before the court then the court issues a non- bailable warrant against the accused.

What are the don’ts in case of a cheque bounce?

There are certain things which have to be strictly avoided in case of a cheque bounce they are as under-

1. Alterations in the amount of cheque.
2. Bringing a change in the name of the payee.
3. Bringing an alteration in the dates of the cheque.
4. Making any other sort of change to the cheque.

Essential factors to be kept in mind

• The delay in filing the complaint (i.e), after a duration of thirty days will be for granted by the magistrate only under the exceptional circumstances.
• A frequent cheque bounce does not mean that the duration of the drawer has been extended.
• The validity of a cheque gets expired after a duration of three months.

Landmark Case laws for cheque bounce in India

• Krishna Janardhan Bhat v. Dattatraya G.Hegde, this case gave the list of all the necessary ingredients such as the existence of a legally enforceable debt, the cheque was supposed to be paid in the due course of fulfilling the liability, and the issued cheque must have been returned due to the insufficiency of funds.
• K.A.Abbas H.S.A vs Sabu joseph And – The plaintiff Sabu Joseph filed a case against K.A. Abbas under Section 138 of the NI Act. Mr.Abbas was sued for the bounce of a cheque worth Rs. five lakhs owing to the insufficiency of funds. The Kerala High Court instructed him to pay a compensation of Rs. 5 lakhs to Joseph. The Apex Court of the country has directed the subordinate courts to award a monetary compensation to the victim in order to assure that they are being taken care of in the Criminal Justice System, the provision for the same has been provided under Section 157(3) of the Criminal Procedure Code.
• Dasharath rupsingh rathod vs. State of Maharashtra- The Supreme Court bench comprising of three judges held that the complaint about the dishonor of cheque can be filed only to the Courts within whose local jurisdiction the offense has been committed.

Necessary amendments made to the Negotiable Instruments Act

As per the notification which was published in the official Gazette, the amendment shall be deemed to have come into force on the 15th day of June 2015. Rajya Sabha passed the Negotiable Instrument (Amendment )Bill on 7th December 2105, this amendment makes changes in those provisions which are related to the territorial jurisdiction of filing the cases for dishonoring the cheques.

After the amendment, the following things are to be noted-

• The case for dishonoring the cheque may be filed in the Courts where the payee maintains his/her account, this is in a case when the cheque is delivered for the collection through an account.
• In case the cheque is presented for the payment by the payee or the holder in due course otherwise through an account then the case may be filed at the place where the drawee maintains his account.

Conclusion

The evolution of cheques in for the purpose of having the transactions in the present era has become more convenient and preferable, rather than carrying the currency. At the same time we need to keep the fact in mind that the practice of not honoring the cheques has also been increased, in order to deter the same, there has been the enactment of Negotiable Instruments Act.

Due to the inculcation of sanctions and strict punitive provisions the commission of dishonoring the cheques has been reduced up to a certain extent moreover, there have been notable amendments made to the existing statute in order to bring down the instances of cheque bouncing.