If you are doing business in India or have made any transaction involving a cheque payment, then you need to be aware of the law regarding cheque bounce in India. A cheque bounce can create a lot of problems for the person who has issued the cheque. In this article, we will discuss the law regarding cheque bounce in India, the role of a cheque bounce lawyer, and how to deal with cheque bounces.
Introduction
A cheque is a very important financial instrument used for transactions in India. It is a legal document that allows the transfer of money between two parties. However, if the cheque bounces, it can lead to legal issues for the issuer of the cheque. Cheque bouncing is a serious offense in India and can lead to criminal prosecution. It is important to be aware of the legal provisions related to cheque bounce in India and the role of a cheque bounce lawyer.
What is Cheque Bounce?
A cheque bounce occurs when a cheque is presented for payment, but it is not honored by the bank. This can happen due to several reasons such as insufficient funds in the account, mismatch of signature, overwriting or alterations in the cheque, or the account being closed. When a cheque bounces, the bank issues a memo to the payee stating the reason for the bounce. The payee can then take legal action against the issuer of the cheque.
Legal Provisions Related to Cheque Bounce in India
Cheque bouncing is a criminal offense under Section 138 of the Negotiable Instruments Act, 1881. The legal provisions related to cheque bounce in India are:
- The cheque should have been issued for the discharge of a debt or liability.
- The cheque should have been presented within the validity period of three months from the date of issue.
- The cheque should have been returned by the bank due to insufficient funds in the account or any other reason.
If the above conditions are met, the payee can send a legal notice to the issuer of the cheque within 30 days of the receipt of the memo from the bank. The issuer of the cheque has 15 days to make the payment, failing which legal action can be initiated against him/her.
Role of Cheque Bounce Lawyer
A cheque bounce lawyer is a legal professional who specializes in handling cases related to cheque bouncing. He/she can help in:
- Drafting and sending legal notices to the issuer of the cheque.
- Representing the payee in court during the legal proceedings.
- Ensuring that the legal proceedings are conducted smoothly and efficiently.
- Advising the payee on the best course of action to be taken in case of a cheque bounce.
A cheque bounce lawyer can help in getting the payment due from the issuer of the cheque and also ensure that justice is served.
Actions to be taken when a Cheque Bounces
When a cheque bounces, the payee can take the following actions:
- Send a legal notice to the issuer of the cheque within 30 days of the receipt of the memo from the bank.
- Wait for 15 days for the issuer of the cheque to make the payment.
- If the payment is not made, file a criminal complaint under Section 138 of the Negotiable Instruments Act within 30 days of the expiry of the 15-day period given to the issuer of the cheque. The complaint should be filed in the court having jurisdiction over the bank where the cheque was issued.
Consequences of Cheque Bounce
Cheque bouncing can have serious consequences for the issuer of the cheque. The consequences are:
- Criminal prosecution under Section 138 of the Negotiable Instruments Act, which can lead to imprisonment for up to two years or a fine or both.
- Civil liability, where the payee can file a civil suit against the issuer of the cheque for recovery of the amount due along with interest and other costs.
- Damage to reputation, as cheque bouncing is considered a financial offense and can lead to loss of credibility in the market.
Differences between Cheque Dishonour and Cheque Bounce
Cheque dishonour and cheque bounce are often used interchangeably, but they have different legal implications. Cheque dishonour is a broader term that includes cheque bounce. Cheque dishonour occurs when a cheque is not honored by the bank for any reason, whereas cheque bounce occurs when a cheque is returned by the bank due to insufficient funds or other reasons specified under Section 138 of the Negotiable Instruments Act.
Ways to Prevent Cheque Bounce
To prevent cheque bounce, the following measures can be taken:
- Ensure that sufficient funds are available in the account before issuing a cheque.
- Avoid overwriting or alterations in the cheque.
- Sign the cheque properly.
- Keep track of the validity period of the cheque and ensure that it is presented within the stipulated time.
Frequently Asked Questions
- What is the validity period of a cheque in India?
- The validity period of a cheque in India is three months from the date of issue.
- Can legal action be initiated for cheque bouncing if the cheque is post-dated?
- Yes, legal action can be initiated for cheque bouncing even if the cheque is post-dated.
- Can the issuer of the cheque be held liable if the cheque bounces due to a technical error by the bank?
- No, the issuer of the cheque cannot be held liable if the cheque bounces due to a technical error by the bank.
- Can a cheque bounce lawyer help in recovering the amount due from the issuer of the cheque?
- Yes, a cheque bounce lawyer can help in recovering the amount due from the issuer of the cheque through legal proceedings.
- What are the consequences of cheque bouncing?
- Cheque bouncing can lead to criminal prosecution, civil liability, and damage to reputation.
Conclusion
Cheque bouncing is a serious offense in India and can lead to legal and financial problems for the issuer of the cheque. It is important to be aware of the legal provisions related to cheque bounce and take necessary measures to prevent it. In case of a cheque bounce, the payee can take legal action against the issuer of the cheque and seek the help of a cheque bounce lawyer. It is advisable to consult a legal professional for guidance and advice in such situations.
