Legal Legal Law

A Step by Step Guide for Cheque Bounce Notice

Before coming to the cheque bounce notice, let’s get to know the basics of the “cheque” and “cheque bounce”.

What is Cheque?

A Cheque is a “bill of exchange” payable on demand. The issuer of the cheque is known as ‘drawer’ whereas in whose favor the cheque is issued is known as ‘drawee’.

What is Cheque Bounce?

Cheque Bounce notice is nothing but an intimation to the issuer that legal action will be taken by the cheque beneficiary in case of non-payment of cheque amount on an immediate basis.

In today’s modern economic world, Cheque is construed as an essential aspect of any transaction. Cheque bounce is a condition which arises due to the non-payment of the amount because of the lack of balance in the account. For the recovery of the amount, prompt action must be taken. Firstly a letter is sent to the drawer to make payment otherwise proceedings shall be initiated. Sometimes a prompt settlement is done on the letter.

In India, as per Section 138 of the Negotiable Instruments Act, cheque bounce or cheque non-payment is a serious offense punishable with fine or imprisonment. For the protection of the rights under section 138 of the Negotiable Instruments Act, cheque beneficiary present cheque bounce notice to the cheque issuer within the period of 30 days of cheque return.

Recently, Parliament has passed The Negotiable Instruments (Amendment) Bill, for quick prosecution in case of cheque bounce. Under this, an order may be passed regarding the payment of interim compensation to the complainant by the defaulter.

What are the Things Required to be Considered for the Validity of Cheque Bounce Notice?

Following things must be contained under Cheque bounce Notice:

1. It must be in reference to Section 138 of the Negotiable Instruments Act;
2. Information regarding the cheque presentation,
3. Reason for non-realization of payment and
4. Information regarding the request made to the cheque issuer to make payment on an immediate
5. A notice must be presented within 30 days of return of cheque to the cheque issuer.

How to Send Cheque Bounce Notice?

A Cheque bounce notice can be drafted through our platform. Once the drafting is completed, it is required to take a print on a plain paper or on the letterhead of the business thereafter it is delivered to the cheque issuer. Cheque bounce notice must contain the following

• Name of the cheque beneficiary,
• Name and address of the check issuer,
• The return date of the cheque,
• Reasons for cheque return,
• Request made to check issuer for immediate alternate payment and
• That it is issued as per the Section 138 of the Negotiable Instrument Act.

A cheque bounce notice is sent through the registered post for the purpose of recording issuing date of notice formally.  Cheque beneficiary can retain one copy of the letter with himself whereas the other copy is delivered to the cheque issuer through registered post.

Why and When Cheque Bounce Notice is Issued?

Following conditions must be satisfied, in order to issue check bounce notice:

• The first condition is that cheque must be towards the liability.
• Within a period of 6 months of validity of cheque, it should be presented by the beneficiary.
• Due to insufficient funds the bank must have returned the cheque.
• Within 30 days of the receipt of information from the bank regarding the insufficiency of funds, demand is raised by the payee by giving a written cheque bounce notice for the payment.
• Within 15 days of the receipt of the written notice of cheque bounce, drawer fails to make payment of the said amount.
• Within one month from the date cause-of-action arise, legal action is initiated.

How to Initiate Legal Action in case of Cheque Bounce?

In order to take the legal action, the following steps must be taken:

1. Cheque Beneficiary issues the Cheque bounce notice by the registered post to the defaulter within a period of 30 days of cheque dishonor. The cheque bounce notice must be in a proper format consisting information regarding the transactional nature, the amount involved, the date on which cheque deposited with a bank, cheque bounce date, the reason of cheque bounce, and beneficiary made the payment request within 15 days.
2. Within 30 days from the expiry of the notice period of 15 days, the payee can file a criminal case in a court in case of cheque issuer made default in payment.
3. Complaints regarding Cheque bounce must be filed in a court of such city where the cheque was presented.
4. Once the case is admitted in the court, a hearing will be done and summons will be issued under Section 138 of the Negotiable Instruments Act.
5. Cheque defaulter would have to appear before the Court for resolution of the matter.

What is the Procedure of Cheque Bouncing?

Following are the steps in short in case of cheque bouncing:

1. Within the period of 30 days, demand notice is sent. On receiving demand notice, the drawer has to make payment within 15 days.
2. The cheque bounce notice is sent by the registered post as to create the proof of the notice sent.
3. In case of payment is not received within 15 days then payee can file a complaint before a magistrate within 30 days.
4. A complaint has to be filed in such a state where the bank is situated.