Cheques are utilized in nearly all transactions which include re-payment of mortgage, payment of salary, bills, expenses, etc. A large majority of cheques are processed and cleared through banks on a daily basis. Cheques are issued for the motive of securing proof of price.
Though, cheques stay a dependable method of charge for many people. however, it’s miles always recommended to issue crossed “Account Payee most effective” cheques in an effort to avoid its misuse.
A cheque is a negotiable instrument. Crossed and account payee cheques aren’t negotiable by means of any character aside from the payee. The cheques must be deposited into the payee’s financial institution account.
Legally, the author of the cheque is known as ‘drawer’, the character in whose favor, the cheque is drawn is called ‘payee’, and the financial institution who is directed to pay the quantity is called ‘drawee’.
However, instances of cheque bounce are commonplace these days. now and again cheques bearing big quantities remain unpaid and are back with the aid of the financial institution on which they are drawn.
The below article provides information on what you may do if your cheque is dishonoured? Here’s a step-by-step guide to the legal procedure that is available to you.
1) If a cheque is dishonoured :
When a cheque is dishonoured, the drawee bank immediately issues a ‘Cheque go back Memo’ to the banker of the payee bringing up the cause for non-fee. The payee’s banker then gives the dishonoured cheque and the memo to the payee.
The holder or payee can resubmit the cheque within 3 months of the date on it if he believes it is going to be honoured the second time. however, if the cheque issuer fails to make a price, then the payee has the proper to prosecute the drawer legally.
If the cheque became issued as a present, closer to lending a mortgage or for unlawful functions, then the drawer can’t be prosecuted in such instances.
The Negotiable Instruments Act, 1881 is applicable for the cases of dishonour of cheque. This Act has been amended many times since 1881.
According to Section 138 of the Act, the dishonour of cheque is a criminal offense and is punishable by imprisonment up to two years or with a monetary penalty or with both.
If payee makes a decision to continue legally, then the drawer has to take delivery of a chance of repaying the cheque amount right away. any such change has to receive the most effective within the shape of observed in writing.
The payee has to send the notice to the drawer with 30 days from the date of receiving “Cheque go back Memo” from the financial institution. the notice should mention that the cheque quantity must be paid to the payee inside 15 days from the date of receipt of the notice through the drawer.
If the cheque issuer fails to make a fresh payment within 30 days of receiving the attention, the payee has the right to record a criminal complaint under phase 138 of the Negotiable Instruments Act.
However, the complaint should be registered in a magistrate’s court within a month of the expiry of the notice period.
It is essential in this example to seek advice from an endorse who is properly versed and experienced in this location of practice to proceed further in the matter.
Conditions for the prosecution : Legally, certain situations have to be fulfilled so that you can use the provisions of section 138.
The cheque should have been drawn by using the drawer on an account maintained with the aid of him.
The cheque needs to have been lower back or dishonoured due to insufficient finances in the drawer’s account.
The cheque is issued toward the discharge of a debt or felony liability.
After receiving the notice, if the drawer does not make the payment within 15 days from the day of receiving the notice, then he commits an offense punishable under phase 138 of the Negotiable devices Act.
Punishment & penalty:
On receiving the complaint, along with an affidavit and relevant paper trail, the courtroom will issue summons and pay attention to the matter. If found guilty, the defaulter can be punished with a monetary penalty which may be twice the amount of the cheque or imprisonment for a term which may be prolonged to two years or both.
The bank additionally has the right to stop the cheque book facility and close the account for repeat offenses of bounced cheques.
If the drawer makes payment of the cheque amount within 15 days from the date of receipt of the notice, then drawer does now not commit any offense.
in any other case, the payee may proceed to report a grievance in the court docket of the jurisdictional magistrate within one month from the date of expiry of 15 days prescribed in the notice.