What is Cheque bounce Notice – The Saviour for Payee?
What is Cheque bounce Notice – The Saviour for Payee?
Author : Sonu Arvind Chaturvedi
Introduction to Cheque:
A cheque is a negotiable instrument that orders a bank to pay a specific sum of amount from a drawer’s bank account to the payee’s bank account. The person writing the cheque is ‘drawer’ and the person in whose favour cheque is drawn is ‘Payee’
The Negotiable Instrument Act, 1881
The Negotiable Instrument Act, 1881 governs the provision of cheque and as per the definition under the inserted in the year 2002 as per the changing need and use of cheque, it was be defined as, “A cheque is a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand and it includes the electronic image of a truncated cheque and a cheque in the electronic form.”
Cheque and its misuse:
The purpose of creating this instrument was to command bank of drawer to pay the sum of money directly into payee’s account because at the time when concept of cheque was introduced there was no concept of ‘Internet banking’ at that point of time and clearing of cheque used to take 3 working days to honour the cheques. But with time this instrument was getting misused by person whose intend was to default payment or conduct frauds.
Misuse Number 1 – People started taking advantage of time gap of 3 working days for clearing process in clearing house as a credit periods and used to issue cheque on Friday’s as at that point of time Saturday used to be holiday for Clearing house so Day 1 used to start from Monday and cheque used to get honoured on Wednesday so that’s how drawer used to get time of 6 days and payee helplessly used to wait for payment.
Misuse Number 2 – Intentionally doing slightly different sign as difference in sign is one of the reason for cheque bounce.
Misuse Number 3 – In absence of ‘Cheque Bounce’ being not punishable offence it was unjust for payee to collect their payment and payee to have further expenses and debt to clear so money flow was affected.
Introduction to Section 138 of Negotiable Instruments Act, 1881 – The Saviour:
As misuse was unjust it was vital to make this act as punishable under the law and hence Payee if he/she satisfies the required criteria can file case against the person under specify situation for dishonest and intentional bounce of instrument – Cheque.
What is Cheque Bounce?
Dishonour of payment by mode of cheque due to:
– Incorrect Sign, Date, Amount mismatch in word and number, overwriting, or
– Insufficient or No funds in Drawer’s Bank Account.
Section 138 – Cheque Bounce Notice, Explained:
- The Unpaid creditor (Payee) can file Notice to Defaulting party (Drawer) for non-receipt of payment when he/she get aware of the fact that cheque is bounced and he gets cheque return from bank which is stamped by word ‘Bounce.’
- This Notice protects the right of unpaid creditor from fraud by dishonest use of cheque.
- It shall be noted that there are chances where bounce on cheque is due to unintentional mistakes whereby on payment no punishment lies.
Easy steps to send Cheque Bounce Notice:
Easy steps to send Cheque Bounce Notice Provide 15 days’ time to defaulter to make the payment by sending him notice and such notice shall be sent within 30 days of receipt of such ‘Cheque Return Memo’ and even after those 15 days’ Notice period he/she fails then:
Step 1: Fill the Form for Draft of Cheque Bounce Notice (under Section 138 of Negotiable Instrument Act)
Step 2: Fill in the details of unpaid Creditor (Payee), defaulting Debtor (Drawer), Details of bounced Cheque, Bank detail and few other questions.
Step 3: Hire well-versed lawyer who will work on drafting the Notice for you and the draft of Notice having all the required details will be ready to serve to defaulting party.
Note:
1. If defaulting party makes payment within the 15 days’ Notice periods than Section 138 will not be triggered.
2. Complaint shall be made within the limitation period of 30 days which starts from 16th day of expiry of Notice Period of 15 days.
Sum it up:
If you are unpaid creditor than you can file a case in a situation when you Cheque bounce is intentional on only ground of insufficient funds for the cheque drawn by drawer in favour of payee out of some liability towards payee and on lapse of 15 days of notice period which is served by payee to drawer and as a consequence, drawer of cheque will be held liable for criminal offence which is punishable with fine which can extend upto twice the amount mentioned on cheque and/or imprisonment upto 2 years. And if a person keeps on defaulting Bank too have power to withdraw cheque facility of such regular defaulting person or even close his account with bank account.
At last I would just like to convey that defaulting payment does not bring prosperity to anyone hence such dishonest cheque bounce shall be avoided and even after that if someone wish to continue such act than Section 138 is here to protect you.
