What is a Cheque?

A Cheque is a type of “bill of exchange” which is payable on demand. Issuer of the cheque is called ‘drawer’ while the person in whose favour a cheque is issued shall be referred to as a ‘drawee’.

A Cheque, is nowadays used in almost all transactions including those of repayment of loans, payment of salary, bills, fees, etc. A huge amount of cheques are processed and cleared by the banks on a daily basis. Cheques are issued in order to ensure a secured amount of payment. Hence, in order to secure the rights of the related parties, the law has provided a proper procedure to be followed in case of cheque bounce, which starts with sending a legal notice. 

 Before serving a notice about cheque bounce to the person who has issued cheque, following information is required-

• The date on which the cheque was drawn.
• The date on which the cheque was presented.
• Reason for non- payment.

What are the important points which are require for a Valid Cheque Bounce Notice?

• It should in accordance to Section 138 of the Negotiable Instruments Act;
• Information about the presentation of the cheque,
•  Reason for the payment through cheque and
• Information about the request made to the drawer to make payment immediately
• The notice must be presented within 30 days from the date of return of cheque to the cheque issuer.

When can a notice for Cheque bounce be issued?

• The cheque must be presented at the respective branch of the bank within months from the date of its issue.
• In order to send a legal notice the cheque must have been dis-honored due to non-sufficient fund.
• The maker of the cheque did not pay the due amount mentioned in the cheque within 15 days from the date the notice was served regarding the cheque bounce.
• The beneficiary has informed the maker of the cheque within 30 days from the date the cheque was bounced.
• The cheque was issued for settlement of some past liability. 

Sending a Cheque Bounce Notice

• A Cheque bounce notice must must include the following-
•  Name of the beneficiary of the cheque.
• Name and address of the issuer of the check.
• The date on which the cheque was returned.
• Reasons for cheque return.
• Request, if was made to the issuer of the check for an immediate alternate payment.

A cheque bounce notice must be sent through a registered post with an objective of recording the issuing date of the notice. Cheque beneficiary must retain one copy of the letter and the other copy should be delivered to the cheque issuer through a registered post.

Why and When Cheque Bounce Notice should be Issued?

• The first condition is that the cheque must be issued for a liability.
• The cheque should be presented within  a period of 6 months of validity of cheque for it to be valid
• The cheque must be returned by the bank due to insufficient funds.
• Within 30 days of the receipt of information from the bank about the insufficiency of funds, demand should be raised by the payee by sending a written cheque bounce notice for the payment of due amount.
• The drawer has failed to make payment mentioned in the cheque within 15 days from the receipt of the written notice of cheque bounce
• Within one month from the end of the above mentioned 15 days period, legal action could be initiated under Section 138 of the NI Act. 

Initiating Legal Action in case of Cheque Bounce?

• Cheque Beneficiary must issue the Cheque bounce notice by a registered post to the defaulter within a period of 30 days from the date of cheque dishonour. The cheque bounce notice should be drafted in a proper format including the information about the transactional, the amount mentioned in the cheque, date on which such cheque was  deposited with a bank, the cheque bounce date, the reason for cheque bounce given by the bank, and beneficiary must have made the payment request within 15 days.
• Within a period of 30 days from the expiry of the notice period of 15 days mentioned in the notice, the payee would have to file a criminal case in the court of law in case of cheque issuer made default in payment.
• Complaints about the Cheque bounce must be filed in the court under whose jurisdiction such cheque was presented.
• After the case has been filed in the court, the court procedure would be followed  and summons would be issued under Section 138 of the Negotiable Instruments Act.
• Cheque defaulter would have to appear before the Court for resolution of the matter.

What is the Procedure of Cheque Bouncing?

• Within the period of 30 days, demand notice is sent. On receiving demand notice, the drawer has to make payment within 15 days.
• The cheque bounce notice is sent by the registered post as to create the proof of the notice sent.
• In case of payment is not received within 15 days then payee can file a complaint before a magistrate within 30 days.

Punishment and Penalty

After having received the complaint, the court would issue summons and hear the matter. When  found guilty, the defaulter will be punished with monetary penalty which could be twice the amount mentioned in the cheque or an imprisonment for a term which could be extended up to two years or both. 

In case the drawer makes payment of the amount mentioned in the bounced cheque within 15 days from the date of receipt of the legal notice, then drawer has not committed any offence. In order to seek proper legal advice or draft the required notice, you should contact an experienced advocate.

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