WHAT TO DO IF A CHEQUE GETS DISHONOURED/BOUNCED?

Dishonour of a cheque or commonly known as cheque bounce is the most common offence being witnessed by the legal system of the country. The common reason why a cheque gets dishonoured is 'insufficient funds' meaning thereby that the funds in the account of the person who has issued the cheque i.e., drawer are not enough to meet the amount mentioned in the cheque. There are other reasons for dishonour of a cheque such as account closed, mismatch of signatures with the bank records etc. Dishonour of a cheque is an offence under Section 138 of the Negotiable Instruments Act, 1881 and an offender may be punished with imprisonment for a term which may be extended to two years or with a fine which may extend to twice the amount of the cheque, or with both. But what to do if a cheque issued to you gets dishonoured? How to get your money from the drawer of the cheque? How can you proceed legally in such a situation? Here is a step-by-step guide to the legal remedy available to get back your money.

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STEP I: Sending Demand Notice Advocates in Indore

As per the Negotiable Instruments Act, 1881 sending a demand notice is the very first and mandatory step to follow while proceeding legally against the drawer of the dishonoured cheque. A Demand Notice is actually a legal notice sent through an advocate demanding the said amount of money mentioned on the cheque. The notice must contain information such as the drawer who has issued the cheque, the transaction for which the cheque was issued by the drawer, details of the cheque such as cheque number and bank of the account holder, the bank to which the cheque was presented, the date on which cheque was presented and date on which the bank returned the cheque, etc. The notice must be sent within 30 days of the receipt of information by him from the bank regarding the return of the cheque as unpaid. The notice must clearly mention the demand by the payee from the drawer of the amount for which the cheque was issued. At this point it is pertinent to understand that calling via phone or just texting through messages to inform the drawer about the dishonour of his cheque and demanding the said amount does not amount to the demand notice and does not fulfill this condition.

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STEP II: 15 days Time Period Advocates in Indore

Once the demand notice has been sent to the drawer then he gets a 15 days-time period from the day he received the demand notice to make payment of the amount mentioned in the cheque to the payee. The drawer can pay said amount through whatever mode. If the drawer does not pay the required amount within fifteen days, then follow the third step.

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STEP III: Filing of Complaint Advocates in Indore

When the drawer does not make payment of the said amount of money to the payee within 15 days of receiving the demand notice then the third step is filing a complaint i.e., a case before the Metropolitan Magistrate or Judicial Magistrate of the first class having jurisdiction of the place where the bank where the cheque was presented and which returned it is located. Such complaint must mention the details of the drawer and the payee, transaction for which the cheque was issued, amount of the cheque, dates on which the cheque was issued, presented to the bank and on which it was returned by the bank, dates on which the demand notice was sent to the drawer by the payee and on which the same was received by the drawer etc. The complaint must be filed within 1 month from the end of the fifteen-day time period in which the drawer has to make a payment.

It is important to annex documents such as copy of cheque, return memo, legal notice and other relevant documents including the list of witnesses with the complaint. It is also important to note that one has to pay the court fees while filing the complaint before the court which is calculated on the basis of the amount of cheque.

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Step IV: Issue of Summons Civil Lawyers in Indore

When one files a complaint before the court and the court is satisfied that all the essential conditions and steps are fulfilled before filing the complaint then the court shall issue a summons commonly known as notice to the offender i.e., drawer of the cheque at the place where such person or witness ordinarily resides or carries on business or personally works for gain, by speed post or by such courier services.

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STEP V: Interim Compensation Civil Lawyers in Indore

However, an application under Section 143A, Negotiable Instruments Act, 1881 can be filed by the complainant before the court for interim compensation. The court can order the offender to pay interim compensation to the complainant which shall be less than 20% of the amount of the cheque. The offender has to pay such interim compensation within 60 days from the date of the order. This time period of 60 days can be further extended by 30 days on sufficient cause being shown by the drawer of the cheque. If the drawer of the cheque is acquitted, the Court shall direct the complainant to repay to the drawer the amount of interim compensation, with interest.

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Step VI: Evidence Civil Lawyers in Indore

When the offender received the summons of the court and appears before the court and the issued are framed by the court then the next stage shall be recording of the evidence. Recording of evidence can be done in two ways: i) giving evidence on the affidavit i.e., by stating all the facts on affidavit and submitting the same in the court and ii) giving oral testimony before the court. The advocate for the opposite party shall cross-examine the person giving evidence.

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Step VII: Judgement Lawyers in Indore

After recording of the evidence of both sides, the court shall pronounce its judgment. The court will assess all the facts and circumstances and the law in force and then decide the case on merits. The court has the power to sentence the offender to imprisonment up to two years or payment of a fine of double the amount of the cheque or both. The offender has to pay the amount to the complainant within one month of the pronouncement of the judgement by the court.

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THINGS TO REMEMBER

1. Time to present the cheque: The cheque has been presented to the bank within six months from the date on which it is drawn or within the period of its validity, whichever is earlier.

2. Nature of Offence: The offence under Section 138 is compoundable meaning thereby the complainant and offender can settle the matter at any stage even after filing the complaint and recording of evidence. The settlement term must be filed before the court so that the court may allow the complainant to withdraw the case and return the court fees paid by him. The offence is also bailable and the offender can easily get bail in such an offence irrespective of the amount of the cheque.

3. Time Period for the case: Although as per Section 143, Negotiable Instruments Act, the courts are expected to complete the proceedings of the case within six months, the workload on the courts made it impossible. The harsh reality is that there is a slew of cases for cheque bounce pending before each JMFC and therefore it takes around 2 years to 4 years. This time limit is not fixed for every case as most of the cases end up in settlement at different times therefore the day of completion of the proceeding may vary.

4. Alternate Remedy: Apart from filing a complaint under the Negotiable Instruments Act, one can file a civil suit (money suit) under Order VII Rule I Code of Civil Procedure, 1908 before a civil court for the recovery of money.

5. Payment by Offender to Complainant: If the offender pays the amount of the cheque plus compensation to the complainant after filing of the cheque and without reaching the settlement then in such case the offender does not get discharged automatically. As per the Supreme Court’s judgement In Re Expeditious Trial of Cases Under Section 138 of N.I. Act, 1881 the trial court can discharge the offender if the complainant is satisfied with the compensation.

6. After Judgement Recourse: If any of the parties is not satisfied with the judgement of the court then they can file an appeal against such judgement.

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