What to Do If a Cheque Bounces (Part 138 of NI Act)
By Fathom Authorized Advocates and Company Consultants
Receiving a bounced cheque might be irritating and financially damaging, particularly when funds are essential for your corporation or private obligations. In India, cheque bounce is a prison offense beneath the Negotiable Devices Act, 1881, and victims have the precise to provoke authorized motion beneath Part 138 of the Act.
Right here’s what to do step-by-step if a cheque issued to you has bounced.
- Perceive What Constitutes a Cheque Bounce Offense A cheque is taken into account bounced or dishonoured if:
- It’s returned by the financial institution because of inadequate funds, account closed, or signature mismatch
- The cheque was issued in the direction of a legally enforceable debt or legal responsibility
- The cheque was introduced inside 3 months from the date talked about on it
If these circumstances are met, Part 138 NI Act is relevant.
- Step 1: Get a Return Memo from Your Financial institution When the cheque is dishonoured, your financial institution will present a Cheque Return Memo stating the rationale for non-clearance. This doc is crucial for additional authorized proceedings.
- Step 2: Ship a Authorized Discover Inside 30 Days As per the Act:
- You could ship a requirement discover to the cheque issuer inside 30 days of receiving the return memo
- The discover should demand the cheque quantity and provides 15 days to pay
This authorized discover should:
- Be despatched by registered submit or courier
- Embrace cheque particulars, return memo, and cause for demand
- Be drafted by a lawyer for correct language and authorized weight
- Step 3: File a Criticism in Court docket if No Cost Is Made If the drawer fails to pay inside 15 days of receiving your authorized discover, you possibly can:
- File a prison grievance beneath Part 138 earlier than a Judicial Justice of the Peace inside 30 days from the top of discover interval
- Submit the unique cheque, return memo, copy of discover, postal receipt, and an affidavit
The court docket could summon the accused and provoke trial. If confirmed responsible, the punishment might be:
- Imprisonment as much as 2 years, or
- Superb as much as twice the cheque quantity, or each
- Jurisdiction for Submitting the Case After a 2015 Supreme Court docket ruling, the grievance have to be filed within the court docket situated the place the payee’s financial institution department is located (i.e., the place the cheque was deposited).
- Can You Concurrently File a Civil Case? Sure. Together with the prison grievance, it’s also possible to:
- File a civil swimsuit for restoration of the cheque quantity with curiosity
- Use the dishonour as proof of non-payment
- Frequent Defenses by the Drawer The accused could declare:
- No authorized legal responsibility existed
- Cheque was stolen or issued as safety
- Discover was not correctly served
Correct documentation and immediate motion can defeat most of those defenses.
- Greatest Practices to Keep away from Disputes
- At all times point out function of fee on the cheque (if relevant)
- Retain photocopy and proof of supply
- Document communication and transactions associated to the cheque
Conclusion – Coping with a bounced cheque requires immediate and well-documented authorized motion. The legislation beneath Part 138 of the Negotiable Devices Act gives a transparent course of that can assist you get better your dues, beginning with a authorized discover and, if obligatory, continuing to court docket. Well timed motion, correct documentation, {and professional} authorized assist can considerably enhance your probabilities of a profitable consequence. Being conscious of your rights helps shield your monetary pursuits and discourages future defaults.
