Cheque Bounce Law

Stages of Cheque Bounce Case

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The following are the important stages in a cheque bounce case.

1) Filing of complaint: The complaint need to be filed before the jurisdictional magistrate within 30 days from the accrual of the cause of action. The complainant need to be present before the magistrate at the time of filing. The original documents need to be shown to the magistrate. If prima-facie a case is made out, the magistrate will post the matter for sworn statement.

2) Sworn Statement: At this stage, the complainant needs to enter the witness box and give further details regarding the case. If the magistrate is satisfied that there is some substance in the case of the complainant, then he will issue a summons to the accused.

3) Appearance of Accused: On receipt of summons, the accused need to appear in the court. If he does not appear in the court, the court will issue an arrest warrant against him. After appearance, the accused is supposed to take a bail from the court with or without sureties. If the accused is unable to furnish a surety then he can deposit a cash security, instead of surety. This cash security is refundable to the accused after the conclusion of the case.

4) Recording of Plea: In the next stage, the court will ask the accused as to whether he has committed the offence or not. If the accused admits the guilt, the court will immediately give him punishment. If he pleads innocence, the court will post the matter for evidence.

5) Evidence: The Complainant has to furnish his evidence, normally by way of affidavit; this is known as examination-in-chief. He needs to produce all documents in support of his case like bounced cheque, dishonor memo, copy of notice etc. Later complainant will be cross examined by the accused. If there are other witnesses in support of the complainant, then their evidence also has to be recorded.

6) Statement of the Accused: After the Complainant side evidence is over, the court will put some questions to the accused regarding his guilt. An accused needs to give his version to the same.

7) Defence Evidence: After the Accused statement the court will give an opportunity to the accused to leave his evidence. The accused can also produce documents in support of his case, as well as witnesses in his support. Accused and his witnesses will be cross examined by the complainant. After this, the case is posted for arguments.

8) Arguments: Both the Complainant and the accused will submit their arguments before the court. They can also furnish judgments of high courts and Supreme Court in support of their case. Normally a written argument containing a gist of the oral argument is also furnished to the court.

9) Judgement: After the arguments, case is posted for judgement. If the court finds that the accused has committed offence, he will be punished with fine or imprisonment. If he is innocent, the court will acquit him. If accused is convicted, then he needs to suspend his sentence, for a period of 30 days with in which time, he can file an appeal before the sessions court.

A Cheque bounce case normally takes an average of two years to complete the proceedings before trial court.

source: http://articles.mentoassociates.com/2009/01/stages-in-cheque-bounce-case.html

Sample 15 days Notice

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Subject: NOTICE UNDER SECTION 138 OF NEGOTIABLE INSTRUMENT ACT READ WITH SECTION 420 OF INDIAN PENAL CODE

On behalf of and under instructions of my client __________ S/o__________ R/o __________ (hereinafter referred to as “my client”). I do hereby serve you with the following legal notice:

1. That my client, an engineering student, while looking for job paid Rs 10,000 to you for assured placement in an MNC, last year.

2. That thereafter my client issued a number of reminders to you for placement, but still no opportunity was provided to him, i.e. as you were unable to fulfill the promise as to placement of my client. Therefore, it was decided between you and my client that the amount of Rs 10,000 should be refunded and as a result you issued him a cheque no 942745 dated 23 December 2011.

3. That the said cheque was presented by my client to State Bank of India, Noida for credit in his account in the month of December 2011 itself, but it bounced due to insufficient funds. And my client contacted you and was assured of cash in lieu of bounced cheque, therefore, my client did not take legal action earlier. My client thereafter again requested many a time to you for the payment of the said cheque amount by telephone and/or through personal visit of his representative, but in vain.

4. That in April 2012, my client again tried depositing the cheque with State Bank of India, Mysore but it was again returned as unpaid with remarks – Funds Insufficient, vide Syndicate Bank memo dated 19 April 2012.

5. That in the facts and circumstances created by you my above said client left with no alternative except to serve you the present notice and calling upon all of you to make the payment of the above mentioned cheque amount totaling Rs 10,000/- (Rupees Ten Thousand only) including bouncing charges in cash with interest @ 24% per annum within 15 days of the receipt of this notice failing which my client shall be constrained to institute against you a criminal complaint under section 138 of the Negotiable Instrument Act read with section 420 of IPC where under you could be sentenced to undergo imprisonment of the two years and also pay the fine equivalent of the double amount of the above mentioned cheque as well as legal charges of this notice of Rs 2100/-

6. That a copy of this notice retained in my office for further reference /record and legal action.

Basic Procedure

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The bouncing of cheque entitles the holder of cheque to take criminal action against the drawer of cheque but only if a strict procedure is followed in this respect, which is as follows:

1. In case a cheque is bounced, a notice has to be issued to the drawer of the cheque (Oppsoite Paty) within 30 days from the date of memo accompanying the bounced cheque is received from the Bank.

2. The notice by the holder of the cheque should demand the amount for which the cheque has been bounced, providing 15 days to settle the matter.

3. The Opposite Party has 15 days from the receipt of the notice to settle the matter and no cause of action arises till the expiry of these 15 days or if paid within this specified period.

4. After the completion of said 15 days, if the opposite party does not settle the matter or ignores the notice, then the holder of the cheque may file a criminal complaint before the appropriate court within 30 days of the expiry of said 15 days.

5. In case, it is beyond the said period of 30 days, the delay can be condoned by the court on sufficient cause being shown.

Stages of Court Proceedings: http://chequebounce.com/2013/stages-of-cheque-bounce-case/

Dishonour of cheque

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Dishonour of cheque is a considered to be an criminal act under Indian Law, when the return of the cheque by the Bank is due to insufficient funds. It is covered under Negotiable Instrument Act, 1881 and provides for imprisonment upto 2 years and/or fine, which may extend to twice the amount of the cheque. Previously, the cheque bouncing act was covered under section 420 of Indian Penal Code but the offender used to get away with civil liability. Therefore, with a view to provide strict punishment, the Negotiable Instrument Act was amended in 1988, with the insertion of chapter XVII under the Negotiable Instrument Act, 1881.

Essential Conditions u/s 138 of the Act:

a) A cheque must have been drawn by a person on an account maintained by him for payment of any sum of money to another person from out of the account;

b) The cheque must have been issued for the discharge, either in whole or in part, of any debt or other liability, though, in the absence of proof to the contrary, it shall be presumed that it was issued for the same;

c) The cheque shall be returned by the bank unpaid –

i) either because of the reason insufficient funds to honour the cheque; or

ii) because it exceeds the amount arranged to be paid from the account by an agreement with that bank.

d) The stop payment of cheque is also covered under said provisions, as it points to the dishonest intention of the drawer.