Cheque Bounce Lawyer

Let’s clear this first, Who is drawer, Payee and drawee in Cheque? Ans: The bank that cashes your check is the drawee, the person who wrote you the check is the drawer, and you are the payee.

Dishonour of check occurs when there is insufficiency of resources in the bank account of drawer against the payment towards a debt or legal liability(Only legal transaction can come under section 138 hence cheque issued for illegal activity cant be a valid contract eg cheque for dowry). Payee can receive a cheque for full or partial payment for the contract and if that dishonour legal action can be taken against drawer.

There are 2 reasons for dishonour of cheque as mentioned in section 138.

  1. Insufficient funds in the bank account
  2. If the amount exceeds with respect to the arrangement of drawer with the Bank (Current account having overdraft facility)

There is one more reason but it’s not covered in section 138

  1. Stoping Payment of Cheque by drawer.

Cheque Bouncing has been made punishable offenses under the Negotiable Instrument Act. Whenever your Cheque got bounced the first step that must be taken in such a case is to send a demand letter or legal notice to the person who has issued the cheque. The main purpose of sending legal notice is to inform the drawer that the legal action can be initiated against him under the Negotiable Instruments Act in case the amount is not paid within a stipulated time period of 15 days.

The following information should be stated clearly in the demand notice:

  • A declaration that the cheque was presented within its period of validity;

  • Declaration of debt or legally enforceable liability;

  • Information about dishonor of cheque as given by the bank, and

  • Demanding the issuer to pay the amount due within 15 days of getting such notice.

The drawer has to make the payment within 15 days of receiving notice. And If the drawer has not replied to the demand notice within a period of 15 days from the date of the delivery of the demand letter or has refused to pay the amount, then the next option available in such a case is to file a complaint in court within a stipulated time period of 30 days under appropriate Section.

Bounced Cheque

There has been some debate regarding the area of jurisdiction of a cheque bounce case. But in the case of Dashrath Rup Singh vs State of Maharashtra, Supreme Court rulings have clarified the issue. The cheque bounce case should be filed in the area where the cheque was submitted by you, to be honoured. If the cheque has been dishonored and the bank finds out that there have been material alterations on the cheque, then you are not entitled to file a cheque bounce case eg: someone tried to change the name of the payee, amount, date etc. Sometimes cheques are given as a method for security, however after completion of business transaction other party tries to fraudulently encash the cheque and files a false case in the court. You can defend that by showing that there was no legal debt at the time of issuance.

Following documents are required for filing a case and we have cheque bounce lawyers in delhi who can assist you in this regard.

  1. Original cheque and return memo (Dishonor due to comments “Account closed”, “Refer to the drawer” or “Stop payment” of the check may be considered to be protected by the supply included in Area 138.)
  2. Copy of notice and original postal receipts.
  3. Evidence affidavit.

Civil Liability: Payee may initiate recovery procedure under order 37 of the code of civil procedure, 1908. It’s also called Money recovery Suit. This could fine twice the amount of Dishonored Cheque as per Section 138 of NIA. If payee files a suit under Order 37 of Code of Civil Procedure, 1908 and gets a judgement in his/her favor then there can be additional impact of costs, interest etc.

Criminal Liability: Here presence of Mens Rea isnt required. Mens Rea is the whole essence of crime. Without having an intention to act in a manner that it causes harm to person or property, then in front of law it is not a crime. It can be prosecuted under Section 417 and 420 of IPC. Punishment under section 138 of NIA is 2 years of imprisonment or fine double the value of cheque or both. This is compoundable, bailable and non-cognizable offence.

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