Facing Issues with Cheque Bounce?

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Cheque Bounce:

Dishonour of a cheque is a punishable offence under Negotiable Instruments Act. A cheque bounces when the bank returns the cheque unpaid due to insufficient funds, stop payment etc. A payee has to send cheque bounce notice to the drawer of the cheque and if the drawer fails to pay within 15 days of receiving the notice. The payee has to file a cheque bounce complaint in the court as a legal action under Section 138 of Negotiable Instruments Act. It is punishable with imprisonment up to 2 years, a fine equal to twice the value of the cheque or with both.

Main Purpose of the Negotiable Instruments Act:

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The Act imposes deterrent punishment for dishonoured cheques to protect payees.

Compounding of offences is allowed under certain conditions, with specific guidelines for fines.

It covers topics such as cheque validity, stop payment instructions, and legally enforceable debts, including demand notices, liability of companies, and compounding of offences.

The Act primarily aims to provide a criminal remedy for dishonoured cheques, with strict terms and conditions.

The Act also addresses offences by companies or firms, holding them liable for dishonoured cheques.

Demand notices must be issued within 30 days of cheque dishonour.

The jurisdiction to try the offence U/S 138 is determined by the location of the complainant's bank.

Limitation:

  • The period of limitation has to be counted from the date when the bank sends return memo to the payee when a cheque is returned unpaid.
  • The payee must give notice of dishonour to the drawer within 30 days of receiving information about the dishonour.
  • The cause of action arises when the drawer of a cheque fails to pay the payee within 15 days of receiving a notice of dishonour.
  • Limitation to file complaint is 30 days from the date of cause of action
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Ingredients for an Offence under Section 138:

  • The drawer issues a cheque in discharge of a legally enforceable debt or liability.
  • The cheque is dishonoured on presentation by the payee where such presentation is made within three months of the issuance of the cheque.
  • On such dishonour, the payee issues a notice under section 138 N.I Act within 30 days of the dishonour, to the drawer intimating him about the dishonour of the cheque and calling upon him to pay the cheque amount within 15 days of the receipt of the notice.
  • The drawer fails to make the payment of the cheque amount to the payee within 15 days of the receipt of notice by him.
  • The payee can file a complaint within one month from the date of cause of action

Conclusion:

The Negotiable Instruments Act provides a legal framework for the use of negotiable instruments in India. It is important to understand the provisions of the Act and the relevant case laws to ensure that negotiable instruments are used in a legally compliant manner. The Act ensures that the transfer of negotiable instrument is simple and efficient, making them an essential tool for business transactions or other legally enfourceable liabilities.

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