Meaning of Cheque bounce
Cheque bounce, which is also called cheque dishonour denotes a situation where a cheque is returned by the bank without release of the amount mentioned in the cheque. A cheque may bounce for various reasons such as signature mismatch, overwriting, incorrect date, insufficiency of funds etc. When a cheque bounces for any technical reason such as signature mismatch or overwriting, it does not give rise to any dispute between the parties because it merely is a technical fault, but when a cheque is dishonoured because of lack of funds in the account of the issuer, it most likely gives birth to a dispute.
Cheque dishonour, in India, is governed by and punishable under the Negotiable Instruments Act. Cheque bounce for any of the reasons is punishable with imprisonment of up to 2 years with or without fine of up to double the amount of the cheque. So, whenever a cheque is dishonoured, the holder of the cheque may file a complaint before the concerned court against the issuer of the cheque. There are certain requirements that are to be fulfilled before a suit against the issuer can be initiated. This is where the Demand Notice comes in.
Why send a Cheque Bounce Notice?
As mentioned above, once a cheque bounces, you can move the concerned court against the issuer, but before doing that you must send them a demand notice and give them a chance to correct their mistake. Following is the procedure you must follow:
- Demand Notice - It must be sent within 30 days of dishonour. In case it is not sent within 30 days, the cheque must again be presented at the bank. And if it bounces again, the demand notice can be sent.
- Notice Period - In the demand notice, a period of 15 must be given to the issuer to resolve the issue. In the notice, the holder demands payment of the cheque amount and the said period of 15 days is allowed for the same.
After you have served the demand notice and the issuer still doesn’t respond within the stipulated period, you can file the suit. However, there are again some conditions to be fulfilled which are as follows:
- The suit must be filed within a period of 30 days after the period of 15 days given to the issuer has expired.
- The amount of the cheque must be a legally enforceable debt I.e. it should be of such a nature that any court or other authority would allow its recovery proceedings.
- The complaint letter must be accompanied by a copy of the cheque, dishonour memo, the notice served and its acknowledgement.
Penalty for Cheque Dishonour
Once found guilty, the issuer can be sentenced to the following -
- Imprisonment - for up to 2 years, or with;
- Fine - up to double the amount of cheque, or both.
So, a person may be imprisoned or fine may be imposed or he may be sentenced to both. The fine so imposed is paid to the complainant.
Necessity of sending a Notice
- It is a legal requirement to file the suit, so if you want to file a suit to recover your money, you must send the demand notice.
- It initiates dialogue between the parties and opens ways for amicable resolution of the dispute.
- In most cases, the issuers are threatened by the penalty and agree to pay back the amount.
What do you get from us?
- First of all an expert will contact you. They will talk to you and understand your case to advice you accordingly.
- They would then take all the details and inform you of all the essentials of demand notice.
- After that, the first initial draft notice will be prepared and sent to you for any changes and your approval.
- Once you approve, final notice will be prepared. One copy will be sent to you and another will be served on the issuer.
What we want from you?
Once our experts get in touch with you, they will require the following things:
- Name and address of the parties.
- A picture of the cheque and dishonour memo for details such as the amount, date and reason for dishonour.
- A detailed explanation of the transaction for which the cheque was issued to you.
- Additional documents to support the transaction may also be required.