Cheque Bounce- Legal Steps to Recover Money.
Cheque Bounce in India: What to Do and Your Legal Options!
Introduction: Getting a cheque bounced can be frustrating, whether you're an employee waiting for your salary or a business owner expecting a payment. But don't worry—you have legal remedies at your disposal. In this post, we'll walk you through a step-by-step process on how to handle a bounced cheque and the legal actions you can take in India.
1. What Is a Cheque Bounce?
A cheque bounce occurs when a cheque is presented for payment, but the bank rejects it due to insufficient funds, a mismatched signature, or other reasons. This can happen for several reasons, but the most common one is insufficient funds in the issuer’s account.
Why It Matters: A bounced cheque isn't just an inconvenience—it's a breach of trust and could have serious financial consequences for the receiver.
2. Step-by-Step Process for Legal Action in India
Step 1: Understand the Grounds for Cheque Bounce Before taking action, it's essential to know why the cheque was dishonoured. The reasons could include:
- Insufficient funds
- Signature mismatch
- Overwriting on the cheque
- Account closure
Step 2: Send a Demand Notice Under the Negotiable Instruments Act, 1881, the first step after a cheque bounces is to send a legal notice to the issuer. The notice must be sent within 30 days of the cheque bounce, demanding the amount due within 15 days from the date of receiving the notice.
Key Tip: Make sure to use registered post or a reliable courier service to track the delivery of your notice.
Step 3: Filing a Case in Court If the issuer doesn't pay within 15 days of receiving the notice, you can file a case under Section 138 of the Negotiable Instruments Act. This must be done within 30 days after the expiry of the 15-day period.
Legal Consequences for the Issuer:
- The issuer could face imprisonment up to two years or a fine up to twice the cheque amount, or both.
- The court could also order the issuer to compensate you for legal expenses.
3. What Documents You Need to File a Case
- The bounced cheque (original)
- Bank's cheque return memo (proof of dishonour)
- Copy of the legal notice sent to the issuer
- Proof of the notice's delivery (postal receipt or courier receipt)
4. Alternatives to Criminal Action: Civil Suit for Recovery
In addition to criminal action under Section 138, you can also file a civil suit for cheque recovery. This will allow you to claim the cheque amount plus interest and compensation.
Where to File:
- You can file a summary suit under Order XXXVII of the Code of Civil Procedure, 1908 in a civil court.
5. Tips to Avoid a Cheque Bounce in Future
- Always ensure the cheque details (date, amount, signature) are accurate.
- Keep track of funds in your account.
- If you're the payee, make sure to communicate with the issuer about any issues before presenting the cheque.
Conclusion:
Handling a cheque bounce might seem overwhelming, but following these legal steps can help you resolve the issue effectively. By sending a timely notice and following through with legal action if needed, you can protect your rights and ensure that justice is served. If you're unsure about any step, it's always best to consult with a lawyer who specializes in cheque bounce cases.
Advocate Vivekanand is an specialist of Cheque Bounce Matters / Banking Laws in India.
He may be contacted at- 09958173388, 09873246043, advocatevivekdelhi@gmail.com
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