Advocate Vikas Daga and Praveen Yogi provide useful information on Cheque Bouncing. Also read a case where the victim of a dishonoured check worth 50,000/- got 1,50,000/- Click on read more below for the details...
What is a Cheque
A Cheque is a bill of exchange drawn upon a specified banker & not to be expressed to be payable otherwise then on demand.
Characteristics of a cheque
1. In Writing
2. Unconditional order
3. specified banker
4. payment to a specified person
5. Payable on demand
6. Specified sum of money
Bouncing or Dishonor of Check
When a Cheque is presented to a bank for payment & if it is not paid, it is said to be “dishonored” or "bounced".
Check is a negotiable instrument and bouncing of a cheque is a Criminal Offence, which is governed by NEGOTIABLE INSTRUMENT ACT, 1881. It is punishable by up to 2 yrs of imprisonment.
REASONS OF DISHONOUR
1- signature not matched
2- overwriting in cheque
3- presented in bank after completion of six month
4- Account closed
5- Insufficient funds
6- Payment stop by account holder
7- Opening balance insufficient
8- Amount differs in words & figures
9- In case of company without seal of company
10- Account number not matched
11- In case of joint accounts only one account holder sign but both signature are required.
12- On the death of customer
13- On the insolvency of customer
14- On the insanity of a customer
15- On Garnishee order
16- In case of crossed cheques
17- When cheque is issued against the rules of trust.
20- Other branch cheque
21- OD limit crossed
What is a NEGOTIABLE INSTRUMENT?
The word negotiable instrument means a document, the ownership of which can be transferred. According to section 13 of Indian negotiable instrument Act 1881 “A negotiable instrument means a promissory note, bill of exchange, or cheque payable either to order or to the bearer.”
Justice K.C WILLIS defines a negotiable instrument as one in which the property is acquired by any one who takes it bone fide, & for value notwithstanding any defect of title in the person from whom he took it.
What should a person do if the check that he has received has been dishonored?
1- Notice should be given to the payer within 1 month of the dishonor of the cheque.
2- After notice, 15 days should be given to the payer for payment.
3- If the payment is not made within 15 days by a payer, a suit can be filed in the court with in one month after the 15 days notice period.
4- Period of notice is necessary before a suit can be instituted.
Importance of LIMITATION PERIOD
The case must be filed within 30 days after completion of the notice period of 15 days. For example…
Notice received by defaulter on 5 November, now one needs to wait for 15 days i.e. up to 20 November. If the payment is not received in these 15 days, a case can be filed within the next 30 days i.e. before 20th Dec. If the case is filed on 21st Dec, it will be dismissed by the court.
If a notice is not given within 1 month after the cheque has bounced, then the check needs to be presented in the bank again and a notice can then be issued after the check bounces.
Steps for giving notice & for filing a suit in the court:
- Notice should given with in 1 month of cheque bounce
- Notice should be sent by Registered post with acknowledgement receipt
- It is advisable to send one copy of notice by mode of U.P.C. as well.
- After waiting for 15 days after the payer receives the notice, a case can be filled in court with in one month
- The following documents will be required in filing the suit:
b. oath letter
c. photocopy of all the documents such as cheque, memo, notice copy, and acknowledgment receipts,
Court Process for filing a case
- Court Fee – For a check up to 50000/- the fee is Rs 200. For a check up to 200000/- the fees is 500/-. Above 200000/- the fees is 1000/-.
- Memo of Advocate is essential at the time of filing a suit along with signatures of complainant.
- After case is file by complainant in court, all documents are cross checked by Judicial Magistrate First Class, so original documents such as original cheque (bounced), original memo, copy of notice, receipt of post office, receipt of U.P.C., acknowledgement receipt, are required at the time of cross checking. The period of limitation is also verified at this stage.
- Now Bhatta (Process Form) is filed by the complainant or lawyer, along with addresss of accused, and the court will then issue a summons to accused for appearance in court on specific date.
- If Accused does not appear in court on the date of hearing, the court issues a bailable warrant on the request of the complainant
- It the accused still does not appear before the court, the court may issue a non-bailable warrant of arrest
What should a person do if the check that he has given has been dishonored?