Index:

• What is the meaning of a Cheque?
• Various circumstances of Cheque Bounce
• Men’s Rea is not required for an offense under Section 138
• Is cheque bounce notice can be issued against the company?
• What information are necessary to be mentioned under the cheque bounce notice?
• When can Cheque bounce notice be issued?
• Process of filing a Cheque Bounce compliant/cases 
• Trial of Cheque Dishonor complaints/cases
• Where and who can file a cheque bounce case?
• Punishment and Penalty for Cheque Bounce
• Is dishonor of cheque a bailable offense?

 Appellate court power:

The Negotiate Instrument Act 1881 defines and amends the law relating to promising notes, bills of exchange, and cheques. In Indian courts, more than 15% of the pending litigation pertaining only to cheques dishonor disputes under section 138 of the Negotiable Instruments Acts, 1881. Through the Negotiable Instrument (Amendment) Act, 2018, the central government has notified Amendment to the Negotiable Instrument Act 1881 by incorporating several new provisions in this Act to address the issue of undue delay, efficacy, and efficiency in cases relating to dishonor of cheques. The object of the provisions from Section 138 to 142 is to increase the credibility of a cheque for easy settlement of liabilities. Though the whole Act is a civil law except chapter 18 of this Act, the penal punishments were added to ensure the smooth functioning of any transaction. This article focuses on the procedure of cheque bounce complaints and how to file a complaint under the Negotiable Instrument Act.

What is the meaning of a Cheque?

Section 6 of the Negotiable Instrument Act, Cheque means a "bill of exchange" payable on demand. Cheques are used in almost all transactions, i.e., re-payment of loans, payment of salary, bills, fees, etc.

Important definitions:

• Drawer: The drawer is the person who issues the cheque, i.e., 'the author of the cheque,' is called Drawee. (Drawer could be the Debtor)
• Drawee:  In whose favor the cheque is issued is 'drawee.
• Payee: The person whose favor the cheque is drawn is called Payee or the person to whom the amount mentioned in the cheque is payable.
• Payee's Bank means:  The Bank where the Payee has a bank account and in which the cheque amount shall be deposited or credited (especially in case of a crossed cheque) or the Bank in which the payee deposits the cheque is called as 'Payee's Banker.'

Various circumstances of Cheque Bounce:

• Overwriting on cheque: The cheque bounces due to overwriting if the drawer's signature, the amount on the cheque, name on the cheque, date, or any other statement has been overwritten.
• Signature mismatch: The cheque will bounce if the drawer's signature is unclear in the cheque or the signature is absent on the cheque or does not match with the Bank's data.
• Insufficient balance in account: If there is not enough balance in the drawer's account to make the cheque payment, the Bank will reject the cheque and return it to the Payee, along with a memo stating that there are insufficient funds to pay the cheque amount.
• Validity of Cheque is expired: After issuing the cheque by the drawer, the cheque must be presented for payment in the Bank within three months. If that cheque is given after three months, it is an expired cheque, and it bounces.
• Damaged Cheque: The cheque will bounce if a cheque is damaged or disfigured and the details are not clear or have marks or stains.
• Mismatch of amounts or digits: If the cheque amount mentioned in words and figures does not match, the cheque will bounce.

Men’s Rea is not required for an offense under Section 138

• Section 138 creates a statutory offense in the matter of dishonor of Cheques on the grounds of insufficient funds in an account maintained by a banker with the banker that exceeds the amount arranged to be paid.
• Generally, in criminal law, Men’s Rea is an essential component of a crime, but dishonor of cheque is a criminal offense where there is no need to prove Men’s Rea.

Is cheque bounce notice can be issued against the company?

Yes, the cheque bounce notice can be issued against the company. A criminal suit may be initiated against a company when it gives the cheque. That cheque is bounced due to an insufficient amount under Section 148 of the Act. in that situation criminal case is instituted under Section 148 of the Act, no offense is committed if the drawer pays the amount to the payee within 15 days of the receipt of the cheque bounce notice received, and no need to take legal action against him for cheque bounce under section 138 of the Act.

What information are necessary to be mentioned under the cheque bounce notice?

A cheque bounce notice must contain the following information:

• Name of the beneficiary on the cheque,
• Name and address of the check issuer,
• The return date of the cheque,
• What are the reasons for cheque return,
• Request made to check issuer for immediate alternate payment
• That it is issued as per Section 138 of the Negotiable Instrument Act.

A cheque bounce notice must be sent through the registered post for the recording issuing date of information formally. The cheque beneficiary can take one copy of the letter with himself. And the other copy must be delivered to the Cheque issuer through registered post.

When can Cheque bounce notice be issued?

The procedure for prosecution in case of dishonor of cheque:

• The cheque must be presented within six months of the validity of the cheque, and the beneficiary of the cheque should present it.
• The cheque must have been dis-honored/returned due to a non-sufficient fund.
• Within 30 days of receipt, notice shall be sent of the 'Cheque Return Memo' from the banker of the Payee.
• The maker of the cheque has failed to pay the amount within 15 days from the date of serving the notice from the Bank regarding the bouncing of the cheque.
• If the Drawer pays off the whole amount within the said notice period of 15 days, it is presumed that the drawer commits no offense.
• If not, the Payee may file a complaint in the competent court against such defaulting Drawee.
• That complaint shall be made within one month from the expiry of 15 days prescribed in the notice to take legal action against defaulting drawee.

Process of filing a Cheque Bounce compliant 

• After 15 days of receipt of cheque bounce notice by the drawer, file a complaint before the Magistrate.
• After filing a complaint, the payee/complainant must immediately appear in the court and provide all the case details.
• If the Magistrate is satisfied with the details provided by the complainant, Magistrate will issue a summons to the drawer.
• The drawer will appear and accept or deny the facts stated by the complainant. If the drawer refuses the complaint, then the court will proceed with the criminal trial of the case.
• The drawer/accused will file his statement, and evidence and arguments of both sides will be presented to the court.

If the court finds that the drawer is guilty of an offense of cheque bounce, the court will pass a judgment of conviction against the drawer for the crime of cheque bounce. Against a drawer, the civil suit can also be instituted by the drawee to pay the cheque amount. The Payee does not have the right to issue a cheque bounce notice in the civil case. The Payee can only give legal notice for recovery of the amount.

Trial of Cheque Dishonour complaints:

Cheque Bounce complaints are governed under section 138 of the Negotiable Instrument Act. It is a Criminal Offence. Thus, the proceedings against such Cheques are dealt with under the Summary Trial provisions of the Code of Criminal Procedure, 1973 (CrPC). The offense relating to Cheque is triable by:

• The Metropolitan Magistrate (in the case of Metropolitan cities) or 
• The Judicial Magistrate of First Class (other than Metropolitan cities). 

Where and who can file a cheque bounce case?

The complaint or case of the dishonor of a cheque is filed at a place where the cheque was submitted for honoring; thus, the Drawer is the one who files a cheque bounce case. The case for the dishonor of a cheque can be filed against the individual and dishonoring the Cheque.

Punishment and Penalty for Cheque Bounce:

According to Section 138 of the Negotiable Instrument Act, 1881, dishonor of a Cheque is a Criminal Offence and punished with:

• Imprisonment for a term not more than two years or
• Fine (which can extend to twice the cheque amount) or
• Both.

Is dishonor of cheque a bailable offense? 

Yes, a dishonor of a Cheque is a bailable offense, which implies that he can get bail under this Act if a complaint is made against him for dishonoring the Cheque. The nature of the offense committed under Section 138 of the NI Act is a non-cognizable offense, a case in which a police officer cannot arrest the accused without an arrest warrant. But, in a case where after getting bail, a person fails to appear before the court after receiving a summons, the court may issue a non-bailable warrant.

To read this article in Hindi: Cheque Bounce

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