All about the term ‘Cheque Bounce’ and the legal provisions associated with it

Submitted by asandil on 4/19/2014

A cheque is a document or instrument that orders a particular payment of money from a bank account. The person who is writing the cheque, known as drawer, he writes the various details on the cheque including the date, monetary amount, name of payee, signs on cheque and ordering their bank to pay the stated amount to that particular organization or that person encash that.

Payee means a person or company who receives the stated amount. The term ‘Cheque Bounced’ uses when the cheque issued by a person to a party has been dishonoured, due to insufficient balance, non-tallying of signature, not matching the amount in words with the amount in figures and not mentioning the payee’s name properly.

As per section 138 in the negotiable instruments act, 1881, in case of Dishonour of cheque for insufficient of funds in the account, the concerned person shall be deemed to have committed an offence shall be punished with imprisonment for a term which may extend to one year, or with a fine which may extend to twice the amount of the cheque, or both, provided that nothing contained in this section shall apply unless-

The cheque has been, presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier, The payee or the holder in due course of the cheque as the case may be, makes a demand for the payment of the said amount of money by giving a notice, in writing, to the drawer of the cheque, within fifteen days of the receipt of information by him from the bank regarding the return of the cheque as unpaid; and The drawer of such cheque fails to make the payment of the said amount of money to the payee or as the case may be, to the holder in due course of the cheque within 15 days of the receipt of the said notice. Explanation:- For the purposes of this section,” debt or other liability” means a legally enforceable debt or other liability.

If the drawer makes the payment within fifteen days from the date of receipt of the notice, then he does not commit any offence. Otherwise, the payee can file a complaint in the court against the drawer within a limited period of time. Once the complaint is filed, the proceedings against the drawer start.

As per Indian law, apart from prosecuting a criminal offence, the payee can also move for money recovery procedure from the drawer in a jurisdictional civil court.

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