Cheque bounce cases are very common in India. A bill of exchange drawn upon a particular banker and payable on demand is known as a cheque. A cheque is said to be bounced or is considered to be dishonored when it is presented for payment, however, due to reasons like insufficient balance in the account, expired validity of the cheque among various others, overwriting, the cheque will not be able to clear. Cheque bounce cases are very common before courts in India with close to 40 lakh cheque bounce cases pending as per reports of the Supreme Court.

Cheques can be used in almost all kinds of transactions like re-payment of loan, bills, payment of salary, fees, etc. A huge variety of cheques are processed and cleared by banks on a regular basis. Where a cheque is a negotiable instrument, crossed and account payee cheques are not negotiable by any individual other than the payee.

In Case Where Cheque Is Dishonored 

A cheque is said to be bounced when there is insufficient account balance, expired validity of cheque, and overwriting among other reasons. The cases of cheque bounce are a quite common claims Supreme Court reports. When a cheque is dishonored, the drawee bank is bound to issue a ‘Cheque Return Memo’ immediately to the banker of the payee specifying the reason for non-payment. A bounced cheque notice is a legal document which states the reason for non-payment to the party at time.

The holder or payee is free to resubmit the cheque within three months of the date on it. Here, we will try to analyze the various legal rights involved in the cheque bounce cases. 

Negotiable Instruments Act, 1881- Section 138

This section is the primary law regarding cheque bounce cases. An analysis of the rights and remedies existing in cheque bounce cases is done below:

Resubmission of the Cheque:

In case of cheque bouncing, once informed, the issuer of the cheque has an opportunity to correct the error which has led the cheque bounce and demand the payee to resubmit the cheque for clearance. This action can be taken within 3 months from the date on which the cheque bounced. The bank informs the recipient of the cheque regarding the bouncing of the cheque by issuing a “cheque return memo” which carries the reasons for non-payment of the money stated in the cheque. For an individual to make a claim that is valid, he/she must make sure that they submit the cheque to the bank within three months from the date of its issue, or else, the cheque will expire.

Demand Notice:

In the cheque bounces another time, the recipient of the cheque has an alternative to send a demand notice to the cheque issuer. The demand notice generally asks the issuer to transfer the necessary funds within 15 days. In case the issuer fails to do so the recipient is entitled to file a complaint under Section 138 of the Negotiable Instruments Act. This demand notice needs to be sent within 30 days of receiving the bounced cheque from the bank. The court may consider a delay in case a justifiable reason is given. 

Filing a Complaint:

In case the issuer of the cheque has not reverted to the demand notice or compiled with the terms of the concerned, the recipient has an alternative of filing a complaint within 30 days before the courts. Regarding jurisdiction, the courts that are located in locations, where the cheque was drawn, where the cheque was presented and/or given back by the bank, have jurisdiction. A complaint can be filed under Section 138 against a company. The point to note is that cheques that are issued in the form of gifts are not included in Section 138 of the Negotiable Instruments Act.

Under the complaint being filed and the necessary court fees being deposited with the court, the original documents like a copy of the notice, the original cheque, and acknowledgment receipt must be verified by the Judicial Magistrate First Class. The person filing the complaint has to appear in the court and then he/she will be examined by the Magistrate. The summons for the issuer would be issued by the Magistrate to appear before the Court and in case found guilty, the issuer would be punished with imprisonment or fine under Section 138 of the Negotiable Instruments Act. Also in case, you want to pursue remedies through this method and the civil proceedings as given below, the recipient of such a cheque can also file a complaint regarding cheating under Section 420 of the Indian Penal Code. 

The individual can still file a case regarding cheque bounce after the period of 30 days in case you can give a reasonable justification for the delay. Generally, the cheque bounce case time limit to send the notice is 30 days.

An Alternative Civil Complaint:

The nature of the complaint as described above is like a criminal complaint, which can possibly result in punishment to the defaulter in terms of jail time but often does not result in the recipient of the bounced cheque given back his dues. Therefore, filing a separate civil suit for recovery of the amount due to him would be prudent for the recipient. 

This can be done by filing a summary suit under Order 37 of the Code of Civil Procedure, 1908. A summary suit differs from an ordinary civil suit in as much as it does not grant the defendant a right to defend himself. And to be able to defend himself, the defendant has to seek prior permission of the court. Summary suits are only permissible in the context of matters of recovery. Therefore, in matters of cheque bounce, a summary suit can be filed for the purpose of recovering the money.

Apart from the risk, a defaulter faces regarding jail time or penalty, it is also open to the bank from which the defaulter has issued the cheque to stop the defaulter from using its facilities and to possibly close the account.

How to escape a Cheque Bounce in India?

You may escape a false or baseless cheque bounce case by having good counsel to represent your objective.

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