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Consequences of Cheque Bounce Notice
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The payer may face prosecution for issuing a cheque against an account with insufficient money. The payee may sue the payer or allow the payer to reissue a cheque within three months.
Yes, you can be arrested if a cheque you write fails due to inadequate money in the account, as this is a criminal crime.
A bounced cheque is a criminal offence under the Negotiable Instruments Act (NIA) of 1881 if the account of the person who issued the cheque doesn't have enough funds. The payee can file a criminal complaint under Section 138 of the NIA, which can lead to the issuer's imprisonment.
Disclaimer: This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. The Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Article. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from the Bank. The Bank, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein. Tax laws are subject to amendment from time to time. The above information is for general understanding and reference. This is not legal advice or tax advice, and users are advised to consult their tax advisors before making any decision or taking any action.
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A cheque is said to have bounced when the payee delivers it to the bank for payment, and the bank returns it as unpaid because of insufficient funds. According to Section 138 of the Negotiable Instruments Act (NIA) of 1881, a bounced cheque is punishable by a fine of up to double the cheque's value, up to two years in prison, or both.
What is a Cheque Bounce Notice?
A cheque bounce notice is a legal warning sent to the issuer of a bounced cheque to demand payment. It's issued under Section 138 of the Negotiable Instruments Act of 1881 when a cheque bounces due to insufficient funds in the issuer's account. The individuals receive the notice within 30 days of the cheque bouncing, and the drawer has 15 days to make payment after receiving it. If the drawer doesn't pay within that time, the payee can file a criminal complaint in court.
How to Know a Cheque Has Bounced?
If a cheque bounces, the bank will message your registered mobile number. It will also issue a cheque return memo to the payee's banker, which will include the reason for the bounce, the date of the bounce, the cheque number, and the date it was issued.
In India, a bounced cheque is considered illegal and a criminal offence. The issuer may be liable to pay penalties, and the bank may take legal action. The offended party may legally pursue the defaulter by issuing a legal notification within 30 days of receiving the cheque return memo.
What are the Circumstances of the Cheque Bounce?
A cheque can bounce for various reasons, including:
What are the Legal Actions for Cheque Bounce?
If a cheque bounces due to insufficient funds, the drawer can be held criminally liable under Section 138 of the Negotiable Instruments Act. The drawer can be punished with a fine of up to twice the cheque amount, imprisonment for up to two years, or both. The court can also sue the drawer for the amount on the cheque.
How to Prosecute a Case of Bounced Cheque?
In this cheque bounce case procedure, defence evidence includes any facts or documents you submit to refute the complainant's allegations and demonstrate your innocence. It may include:
Punishment and Penalty for a Bounced Cheque
Bouncing a cheque is a punishable crime. The cheque bounce penalty is up to double the value of the cheque or imprisonment for up to two years. The payee may sue the payer or allow the payer to reissue a cheque within three months.
Banks also charge cheque bounce penalties for dishonouring a cheque, which varies from bank to bank. The act states that if a cheque drawn by the accused on an account maintained by them in a bank for the discharge of debt or liability is returned unpaid due to insufficient funds or because the amount exceeds the agreement with the bank, the drawer is deemed to have committed an offence under this act.
Section 144 of the Negotiable Instruments Act
The Negotiable Instruments Act allows a magistrate to serve summons to a witness or accused by registered post. The summons can be sent to the accused's or witness's residence or business. However, a summons to an accused must be presented in person, and the accused must provide a signed response or an endorsement from the postal department or courier service.
How to Respond to a Cheque Bounce Case?
In India, if you receive a legal notice for a cheque bounce, you must respond within 15 days. Your response should include:
If the complainant files a case against you, you should hire a lawyer and file a reply in court. You'll need to present your case and evidence, such as the original cheque, bank records, and any relevant correspondence in court. You should also be prepared for cross-examination by the defence lawyer. Ensure you know all about the cheque bounce punishment, as mentioned above.
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