Cheque Bounce Notice: Procedure, Remedy & Format

A cheque is considered a negotiable instrument as per Section 13 of the Negotiable Instruments Act, 1881. It acts as a promise to pay a certain sum of money to the person or entity mentioned on it. The use of cheques has become an integral part of the economy as they provide a convenient means of payment for various transactions. However, the issue of cheque bounce is a major concern. According to Section 138 of the Act, if a cheque is dishonoured, the person who issued the cheque can be prosecuted and punished with imprisonment for a term that may extend to two years or with a fine that may extend to twice the amount of the cheque, or both. In addition to the provisions of the Negotiable Instruments Act, there are other laws that deal with cheque bounce. The Reserve Bank of India (RBI) has issued guidelines to banks on the handling of cheque bounce cases. The guidelines specify the time frame within which banks must inform the issuer of the cheque about its dishonour. The issuer must be given a period of 15 days from the date of receipt of the notice to make the payment. If the payment is not made within this period, legal action can be taken. There are several reasons why a cheque may bounce. Some of the most common reasons are as follows: Cheque bounce is a criminal offense in India and can result in legal action against the person who issued the cheque. The recipient of the bounced cheque can file a complaint under Section 138 of the Negotiable Instruments Act, 1881, within 30 days of the cheque being returned by the bank. The person who issued the cheque will receive a legal notice, and if the payment is not made within 15 days, the recipient can file a criminal complaint in a magistrate court. The penalty for cheque bounce can be imprisonment for up to two years or a fine of twice the amount of the cheque or both. The Reserve Bank of India has implemented several measures to reduce the incidence of cheque bounce, including the introduction of the Cheque Truncation System (CTS) and the National Automated Clearing House (NACH) to facilitate electronic payment transactions. Cheque bounce can be prevented by taking the following steps: According to Section 138 of the Negotiable Instruments Act, a complaint for cheque bounce can be filed in any of the following places: The complainant has the option to choose any of the above locations as the place for filing the complaint. However, once a complaint is filed in a particular location, subsequent complaints related to the same cheque must be filed in the same location. In the case of K. Bhaskaran v. Sankaran Vaidhyan Balan, a two-judge bench examined the issue of territorial jurisdiction in cheque bounce cases. The court noted that the offense under Section 138 of the Negotiable Instruments Act can only be completed after a series of acts, including drawing a cheque, presenting it to the bank, the bank returning the cheque unpaid, giving notice to the drawer, and the drawer's failure to make payment within 15 days of receiving the notice. The court held that the complainant can file a case in any court that has jurisdiction over any of the local areas where any of the five acts were done. To reach this decision, the court referred to Sections 177 to 179 of the Code of Criminal Procedure, 1973 (CrPC). In contrast, in the case of Harman Electronics (P) Ltd. v. National Panasonic (India)(P) Ltd., a two-judge bench ruled that the court within whose limits the notice was issued cannot have territorial jurisdiction. This is because the cause of action arises from the communication of the notice, rather than the mere issuance of the notice. As a result, one of the acts mentioned in the K. Bhaskaran case was excluded in the Harman Electronics case. Furthermore, in the case of Harman Electronics (P) Ltd. v. National Panasonic (India)(P) Ltd., the court rejected only one of the principles established in the K. Bhaskaran case, namely, that the place from where the notice was issued does not give rise to a cause of action. This rejection was justified since no branch of law recognizes that the place of notice issuance creates a cause of action. However, the Harman Electronics case did not overrule the other four principles established in the K. Bhaskaran case. The legal remedy and procedure in case of a bounced cheque typically involves pursuing legal action against the person who issued the cheque, which may involve steps: Legal notice is imporant for recovery of money for cheque bounce case. Please find below sample cheque bounce notice format for money recovery. To, [Name and Address of the Issuer of the Cheque] Dear Sir/Madam, Sub: Demand for payment of cheque amount of [Amount in words and figures] dated [Date of the cheque] drawn on [Name of the Bank and Branch] bearing cheque number [Cheque Number] We regret to inform you that the cheque dated [Date of the cheque] drawn on [Name of the Bank and Branch] bearing cheque number [Cheque Number] for an amount of [Amount in words and figures] issued by you in our favour has been dishonoured by your bank due to [Reason for the dishonour]. We had presented the cheque for encashment on [Date of presentation], and it was returned unpaid on [Date of the dishonour]. We had subsequently sent a legal notice to you on [Date of the notice] demanding payment of the amount due, but we have not received any response from you. We, therefore, demand that you immediately pay the cheque amount of [Amount in words and figures] along with interest at the rate of [Rate of interest] from the date of the cheque till the date of payment, failing which we will have no option but to take appropriate legal action against you to recover the amount due to us. Please take this as a final notice to settle the matter and avoid legal proceedings. Thanking you, [Your Name and Address] [Date of the Demand Notice] Section 138 of the Negotiable Instruments Act, 1881, deals with the offence of dishonour of a cheque. It provides for punishment for the issuer of a cheque who fails to make payment to the payee despite being given a legal notice for the same. No, a complaint cannot be filed for a cheque that is issued for a future date as it is considered invalid until the date mentioned on the cheque. For obtaining legal services for cheque bounce notice connect with Online xbrl now. Reasons for Cheque Bounce
Legal Consequences of Cheque Bounce
Steps to Prevent Cheque Bounce:
Jurisdiction in Cheque Bounce:
Legal Remedy and Procedure in Case of a Bounced Cheque
Sample Format For A Demand Notice For Recovery of Money In The Case of A Bounced Cheque
What is Section 138 of the Negotiable Instruments Act?
Can a complaint be filed for a cheque that is issued for a future date?