Cheque Bounce- Reasons and Filing a Suit
A cheque is considered to be an important aspect of the financial system in different countries across the globe. Being specific, it is regarded as an important document which an individual, company or a government can use for the transaction of various amounts. Further, it is also termed as a negotiable instrument to transport money in a physical form or to execute the inter-account transfer.
This situation of cheque bounce is a term used to define if there has been unsuccessful processing of a dispensed cheque due to several reasons. One of the primary reasons for a bounced cheque can be Non-sufficient funds (NSF) in the issuer’s account. The bank shall return or dishonor the cheques in addition to impose a particular charge.
Reasons for Cheque Bounce
There have been instances when the issue isn’t actually aware of the reason why the cheque has been dishonored by the bank. Hence, focusing on some of the major reasons for cheque bounce that should be avoided.
If your account lacks funds from which the cheque is issued, then there is a high chance for the cheque to get bounced. Also, if you have issued or have received a cheque connected to an account that holds less money than the amount written on the cheque, then the bank won’t be in a condition to be able to process the full amount and therefore will curb the payment and dishonor it.
Considering this, the bank will levy a nominal penalty imposed on both the parties- the issuer as well as the depositor.
The date mentioned on cheques
The date is an important part of the cheque and any sort of problem with the date would end in your cheque is bounced.
If the signature is mismatched or doesn’t match with the bank’s records, then the issued cheque will be tagged as a bounced cheque.
The difference in Amount mentioned in Numbers and Words
If the cheque highlights a difference in the amount that is to be payable written in words and in numbers, then the concerned bank will bounce that cheque.
It is to be ensured that the cheque isn’t damaged or disfigured because the various banks across India do not entertain such cheques on which the details aren’t clearly visible.
Overwriting on cheque
Any type of scribbling, correction or overwriting shall not be acceptable. Such a cheque will be dishonored.
How to file a cheque bounce case
When it has happened for the first time
When the cheque bounce has happened for the first time, in that case, the bank issues a ‘cheque return memo’ and refuses to honor it, stating the reasons for non-payment. Further, the bank also charges a fee for a bounced cheque.
In a scenario like this, the account holder is in the capacity to resubmit the cheque within 3 months of the date of issue if he is sure that it would not be dishonored the next time.
Sending a Legal Notice
Another way is to send a legal notice to the defaulter within 30 days of receiving such cheque return memo. All the relevant facts of the case, like the nature of the transaction, amount, date of depositing the instrument in the bank and the subsequent date of dishonoring should be specifically mentioned in the notice. The following information should be contained in the notice which is as follows:
a) A statement by the depositor that he has presented the cheque within its period of validity.
b) Statement of debt.
c) Information regarding the reason for the dishonor of cheque.
d) Summoning the drawer to pay the amount due.
e) A statement that the drawer is being given 15 days time to pay up else legal action will be initiated.
If no action has been taken on the notice or repayment is not done within 30 days of receiving the notice, the payee has the right to file a criminal complaint under Section 138 of the Negotiable Instruments Act.
The complaint is required to be registered in a magistrate’s court within a month of the expiry of the notice period.
After receiving the complaint, along with the affidavit and relevant documents, the court shall issue summons and hear the matter. If the defaulter is found guilty, he can be punished with a prison term of two years or a fine as high as twice the amount of cheque.
However, an out of court settlement can also be attempted at any point in time. WizCounsel can help you Find a lawyer who may help you sought on sending a legal notice.
You can also read our blog for on – How to Reply to Legal Notice for Non-Payment of Credit Card Dues
Filing a civil suit
If in case, the due amount has been not recovered during the long battle of legal dispute, an individual can separately file a civil suit for recovery in which the costs would be borne by the petitioner.
This is where a summary suit under Order 37 of CPC 1908 comes into the picture. It does not give the accused the right to defend him instead; the defendant has to take permission from the court to do so.
Court fees actually defer from state to state. Further, prosecuting the defaulter under Section 138 of the Negotiable Instruments Act is the best remedy for recovering the money.
Format for the filing the complaint under Section 138
IN THE COURT OF _____________________________
COMPLAINT NO ___________ OF____
IN THE MATTER OF:
POLICE STATION: ____________
COMPLAINT UNDER SECTION 138 OF THE NEGOTIABLE INSTRUMENTS ACT, 1881 (AS AMENDED UPTO DATE) FOR THE SUM OF RS. ______________ (RUPEES ________________ ONLY)
MOST RESPECTFULLY SHOWETH:
That the Complainant is working as _________________________ and is residing at ______________________________________
That the present complaint is being field by the complainant Mr.___________________ to cause appearance in this Hon’ble Court and to depose and conduct the proceedings.
That on _______________ the accused namely Mr. ______________ had approached the complainant personally and asked for a friendly loan of Rs. ________________.
That on __________ complainant paid Rs. ___________ (Rupees _____________ as friendly loan repayable on demand.
That towards payment of amount of loan the accused issued Cheque No. ______________ Dated ____________for Rs. ___________to the complainant. That in order to discharge their above said liability and in accordance with the agreed terms and conditions, the accused had issued Cheque No. _____________ Dated ___________for Rs. ___________/- drawn on ___________________. The said cheque was issued from Account No. ____________________which is held in the name of the accused. That the present complaint is based on the dishonor of the above said cheque which was issued in discharge of a lawful debt.
That at the time of handing over the above said cheque the accused had assured the complainant that the said cheque will be honored/encashed on presentation. Taking the above assurance/representation as true, the complainant had accepted the above-said cheque.
That on the basis of the assurances given by the accused, the complainant presented the above said cheque with its bankers namely ___________________________________ and was dishonored vide cheque return advice dated _____ issued by the complainants bank. The aforesaid cheque was returned unpaid vide returning memo dated ____________with the remarks “FUNDS INSUFFICIENT”.
That the dishonor of the cheque clearly shows and establishes that the accused did not intend to honor the amount under the said cheque.
That on account of the dishonor of the said cheque, the complainant had served a legal notice dated ____________upon the Accused by way of Registered Post vide Receipt No. _________________ dated ___________However, despite service of notice; the accused has not taken any steps to liquidate his liability and has failed to make balance payments to the complainant towards the amount covered under the said cheque, within the statutory period of 15 days or thereafter. Thus, the Accused has therefore committed an offense within the meaning of Section 138 and other sections of the amended provisions of the Negotiable Instruments Act, 1881, for which he is liable to be prosecuted and punished.
That the accused have failed to make payment against the said cheque which has been done by them malafidely, intentionally and deliberately and knowingly. That at the time of issuing the said cheques the accused were fully aware that the said cheques will not be honored on presentation. Therefore, the accused has dishonestly induced the complainant to advance a sum of _________________ /- (Rupees __________________ Only) fully knowing that he cannot repay the said amount to the complainant.
That the accused is guilty of offense under Section 138, Negotiable Instruments Act and is also liable to be prosecuted under Section 420 of the Indian Penal Code.
That in view of the facts and circumstances, the complainant has a cause of action and right to file the present complaint. The cause of actions has arisen in favor of the complainant when, on the expiry of the notice period, the Accused has not come forward to pay the amount relating to the dishonored cheques. The cause of action is still subsisting and continuing in nature.
That the cause of action has arisen at __________ as the cheques was issued at _________, and the same was payable at __________ and was also dishonored at _________. Therefore this Hon’ble Court has jurisdiction to try and adjudicate upon the present complaint.
That the complaint is well within the limitation period prescribed under the Act:
i. Date of Dishonor ______
ii. Date of Notice ______
iii. Date of filing Complaint _______
That a list of documents and list of witnesses are annexed with this complaint.
It is, therefore, most respectfully prayed that this Hon’ble Court may be pleased to:
Summon, prosecute and punish the Accused and also direct the accused to pay the amount as double to the amount covered under the said dishonored cheques, under the provisions of Section 138 read with Section 142 of the Negotiable Instruments Act,1881 as amended by the Negotiable Instrument laws (Amended and Miscellaneous Provisions) Act, 2002. In accordance with Section 357 of Code of Criminal Procedure 1974, out of the penalty imposed, the Accused be ordered to compensate the Complainant to the extent of Rs._______ /- (Rupees ______________ Only) and
Such other and further orders may be passed as may be deemed fit and proper by this Hon’ble Court.
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