Frequently Asked Questions On Cheque Bounce

QUERY #1

1. Should a cheque bounce notice be sent within thirty days from the day of receipt of the return memo? 
2. Should the reply of a cheque bounce notice be sent within fifteen days from the date of receipt of this notice?

ANSWER:

The short answer to your question is that YES, you are correct.

The legislation pertaining to cases of cheque bounce is the Negotiable Instruments Act of 1881. As per section 138 of the same act, a case of cheque bounce exists when any cheque drawn by a person on an account maintained by them with a banker for the purposes of discharge of any debt or liability existing between them and another person through payment is returned by the bank unpaid, either because the amount of money in the account is insufficient or because it exceeds the amount of money that was arranged to be paid from the account by an agreement with the bank.

Coming to the question, section 138 also specifies some requirements to be completed before such a case is taken to court. It mandates that upon receipt of the information of the cheque being returned from the bank unpaid, the payee or the holder of the cheque must issue a notice in writing within thirty days to the drawer apprising them of the situation and demanding payment of the said amount of money. 

The drawer must reply to this notice within fifteen days from the day of receipt of the said notice by completing the payment of the said amount of money to the payee.

I hope this helps. Thank you for your time and patience!

QUERY #2

If a person is convicted in a cheque bounce case;

1. Will he certainly be imprisoned for six months?
2. Can the plaintiff expect double the amount in the cheque as fine?

ANSWER: 

The short answer to your question is NO. There is no certainty that the accused will be imprisoned for six months.

The Negotiable Instruments Act, 1881, is the legislation that pertains to cases of cheque bounce. Section 138 of the same act defines a case of cheque bounce to be when any cheque drawn by a person on an account maintained by them with a banker, for the purpose of discharging or fulfilling any debt or liability they have with another person, is returned by the bank unpaid, either due to insufficient money in the account or because it exceeded the amount of money that was agreed to paid by the bank from that account as per any agreement made with the bank.

The same section also lists out the punishment to be given in a case of cheque bounce. As per the same, if a person is found guilty of a case of cheque bounce, they could be imprisoned for a term not more than two years, or with a fine which may extend up to twice the amount of money in the cheque, or both.

Therefore, there is no certainty that the accused, if found guilty, will be imprisoned for a term of six months, as it is up to the discretion of the court to decide whether they should be punished with imprisonment, or fine, or both.

I hope this helps. Thank you for your time and patience!

QUERY #3

If the cheque issued by a bank was returned as the bank was blocked by the RBI, can this constitute a case of cheque bounce?

ANSWER: 

The short answer to your question is NO. It will not come under section 138 of the Negotiable Instruments Act.

The laws pertaining to cases of cheque bounce are given in the Negotiable Instruments Act of 1881. It defines a case of cheque bounce to be when any cheque drawn by a person on an account maintained by them with a banker, for the purpose of fulfilling a debt or liability, is returned by the bank unpaid, either due to insufficient funds in the account or because it exceeded the amount that was agreed to be paid by the bank from the account as per any agreement made with the bank.

In this case the Reserve Bank of India has blocked that bank, which cannot be considered as a case of cheque bounce as for that the cheque should have been returned unpaid from the bank due to insufficient funds in the account or because it had exceeded the amount agreed to be paid by the bank from the account as per some agreement made with the bank. Therefore it is not the fault of the drawer but the fault of the bank. 

Thus the above case cannot constitute a cheque bounce, but the payee may send a legal notice to the drawer apprising them of the current situation.

I hope this helps. Thank you for your time and patience!

QUERY #4

If a cheque issued by a company has bounced:

1. Who should I file the suit against? The company or its directors?
2. If I file the suit, what will be the extent of damages to be expected?
3. Is this suit of a civil or criminal nature?
4. Do I have to pay a court fee?

ANSWER:

The short answer to your question is YES. You may file a case against both the company and the director.

The legislation that governs all the laws and rules regarding cases of cheque bounce is the Negotiable Instruments Act of 1881. The same act defines a cheque bounce in its section 138 as when a cheque drawn by a person on an account he maintains with a banker, for the purpose of fulfilling any debt or liability, is returned by the bank unpaid, either due to insufficient funds or because it exceeded the amount agreed to be paid by the bank from the account as per any agreement made with the bank. 

If the offence of cheque bounce was committed by a company, section 141 of the same act prescribes the people to be held liable. In a case where a company commits the offence of cheque bounce, all the people responsible for the conduct of business of the company, including the director, manager, secretary, or other officer of the company, shall be held liable, along with the company itself. Any individual working for the company may exclude themselves from liability by proving that the said offence was committed without their knowledge, or that they had exercised due diligence to prevent the occurrence of such an offence. 

If such an offence is committed by a company, it is a criminal offence and can be punished as per the punishments prescribed in section 138 of the Negotiable Instruments Act, 1881. Therefore, the convicted individual may be imprisoned for a term not more than two years, or  be ordered to pay a fine that can extend up to twice the amount given in the bounced cheque, or both. A court fee must be paid for a suit of cheque bounce, and such fee varies from case to case and the money given in the cheque that was bounced.