CHEQUE BOUNCING: WHAT YOU SHOULD KNOW
- What is the law on Cheque Bouncing?
Section 138 of the Negotiable Instruments Act, 1881 (Act) deals with “Dishonour of Cheque”. This Act provides for Criminal Prosecution, in case a Cheque issued towards legally enforceable debt is bounced. The Act provides for i) Monetary Penalty: At the time of conviction of the accused (drawer of the Cheque), the Hon’ble Court may impose monetary penalty upto twice of the cheque amount, and ii) Imprisonment: The Hon’ble Court may also punish the accused with imprisonment upto two years.
- Is there any time limit to file a case of Cheque Bouncing?
Following time limit is prescribed under the Act:
Presentation of Cheque: Payee shall deposit the Cheque with his banker within 3 months from the date of the cheque.
Dispatch of Demand Notice: On bouncing of the Cheque, the payee shall make the “demand” to the drawer for the payment of the said amount of money, within 30 Days of the receipt of Bank Return Memo.
Filing of Complaint: If the Drawer of the Cheque fails to make the payment of the Cheque amount, within 15 days from the receipt of notice, the payee shall file the Complaint with the Criminal Court within 1 month from the expiry of the demand period of 15 days.
- How an action of Cheque Bouncing different from Civil Recovery cases?
A Civil Recovery case is a Civil matter and the concerned Court can pass the decree only for repayment of the debt along with reasonable interest & cost. Whereas, in Complaint filed under Section 138, the Criminal Court may order the Accused to pay fine upto twice of the cheque amount along with imprisonment upto 2 years.
- Whether Cheque bouncing provisions are really effective?
Complaint under Section 138 is to be proceeded as a summary trial (i.e. fast track proceeding) and the Magistrate is bound to dispose-off the matter in a speedy manner. However, due to huge pendencies and delaying practices, these matters often get delayed. But, recently the Government of India, has made major changes in the law to make provisions more stringent. Further, due to fear of “jail”, the accused often settle the matter and make the payment before final disposal of the matter.
- How a person can save himself from false case of cheque bouncing?
The provisions of Section 138, being criminal in nature, have also been misused in order to harass innocent persons. In such a case, if there is no actual liability, then there are enough safeguards to protect the aggrieved person. The Higher Courts also come to the rescue of the innocent person.
- Whether there is any change (amendment) in the existing law on Cheque Bouncing?
The Govt. of India, has made major amendment in August 2018 that enables the Court to give interim (in-between) relief to the payee of the Cheque by ordering the drawer of the Cheque to pay upto 20% of the Cheque Amount as an immediate relief. One can also file appeal there against. The popularity of these cases can be ascertained from the fact that almost every second case is a Cheque Bouncing case.
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