October 23, 2017

Cheque Bounce

Cheques are the most widely used financial instruments and thousands of cheques are cleared and paid off by banks on a daily basis. The person who draws the cheque in favour of the other i.e. the payer is called the ‘drawer’ and the person in whose favour the cheque is drawn i.e. the recipient is called the ‘drawee’.

Since it’s a widely used instrument, the cases of frauds and cheque bounce are also many. A Cheque is said to have bounced when the account of the drawer doesn’t have sufficient funds in his account to fulfil the amount mentioned on the cheque.

In case of cheque bounce and resulting non payment of money, a ‘Cheque Return Memo’ is issued by the drawee’s bank specifying the reason for the same. The dishonoured cheque along with the memo is then sent to the payee.

Now in this case, the drawee has two options – either wait and resubmit the cheque if he is hopeful that the second time, the cheque might be honoured or he could after giving a notice, take legal action against the drawer of the cheque under the Negotiable Instruments Act, 1881.

However, in case the cheque was meant to be a gift or a loan for any illegal or unlawful object, the drawee cannot take any legal action against the drawer.

Section 138 of the Negotiable Instruments Act, 1881 specifies the offence of dishonour of cheque as a criminal offence and also provides that the same is punishable with  imprisonment upto 2 years or penalty/fine or both.

The following essentials are required to be fulfilled before proceeding with any legal action –

  • The cheque in question  issued by the drawer must have been on an account that belongs to him;
  • The reason for dishonour of cheque must be ‘insufficient funds’;
  • The cheque in question has been given to satisfy a debt or towards a legal object;

However, a notice needs to be served before any legal action can be taken and further on a criminal complaint needs to be filed in the Magistrate’s Court.

The matters under this category are tricky and thus the guidance and resources of a lawyer who has expertise and experience in this particular area are required to move forward with the legal action and you have come to the right place. With 20 years of experience in this field along with a high success rate you can stay assured that we will promptly deliver to you the best and most effective legal course of action available in the minimum possible time.