A cheque bounce occurs when a bank rejects a cheque presented for payment due to insufficient funds, a mismatch in signatures, or other technical or legal reasons. Here’s what typically happens in cheque bounce cases:
1. Notification of the Bounce
- When a cheque bounces, the payee (the person or entity presenting the cheque) receives a return memo from their bank explaining the reason for the dishonor.
- The drawer (the person who issued the cheque) may also be notified by their bank.
2. Legal Implications
Cheque bounce is a criminal offense in many jurisdictions. Under Section 138 of the Negotiable Instruments Act, 1881in India, the following legal procedures apply:
A. Sending a Legal Notice
- The payee must send a legal notice to the drawer within 30 days of receiving the cheque bounce memo.
- The notice should demand the payment of the cheque amount within 15 days of receipt by the drawer.
B. Filing a Complaint
- If the drawer fails to pay within the stipulated 15 days, the payee can file a criminal complaint in court within 30 days.
- The case is generally heard in a magistrate’s court.
3. Court Proceedings
- Summons Issued: The court issues a summons to the drawer.
- Hearing: Both parties present evidence and arguments. The cheque, return memo, legal notice, and acknowledgment of the notice are key pieces of evidence.
- Verdict: If found guilty, the court may impose:
- A fine (up to twice the cheque amount).
- Imprisonment (up to two years in India, depending on the severity).
4. Civil Remedies
In addition to criminal proceedings, the payee may also file a civil suit for recovery of the cheque amount.
5. Settlement
- Many cheque bounce cases are resolved out of court through mutual settlement.
- If the drawer makes the payment during or before the proceedings, the case may be withdrawn.
Key Precautions to Avoid Cheque Bounces:
- Ensure sufficient funds in the account.
- Maintain consistency in signatures.
- Avoid issuing post-dated or expired cheques.
- Double-check details like the payee’s name and amount.
If you’re dealing with a cheque bounce case, consulting a lawyer is highly advisable to ensure compliance with legal procedures.
