Cheque Bounce Notice
Overview of a Cheque Bounce Case
In a cheque bounce scenario, typically, the account holder issues a cheque to the payee, which is then presented for payment at the bank. However, if the cheque bounces due to insufficient funds or other reasons, it creates complications for both the payer and the payee. The bank notifies the account holder about the insufficient funds, which can lead to potential legal ramifications.
Consequences of a Dishonoured Cheque
- Financial penalties: The bank imposes a penalty, which can amount to ₹200, to be paid by the drawer of the cheque.
- Criminal prosecution: Under Section 138 of the Negotiable Instruments Act 1881, the drawer can face criminal charges, potentially leading to imprisonment for up to two years, a fine of up to twice the cheque amount, or both.
- Civil suit: The payee has the option to file a civil suit against the drawer to recover the cheque amount, along with damages for any losses or inconvenience incurred.
- Damage to reputation: A dishonoured cheque can tarnish the reputation of the drawer, affecting future financial dealings and relationships with businesses and individuals.
Procedure for Handling a Cheque Bounce Case
- Demand Notice: The first step involves sending a demand notice to the individual who issued the bounced cheque.
- Contents of Notice: The notice should detail information about the bounced cheque, including the issuance date and a copy of the dishonoured memo.
- Timeframe for Payment: The recipient of the notice has 15 days to make the payment.
- Filing a Complaint: If payment is not received within the stipulated time, a complaint can be filed in court.
- Documentation: Necessary documents such as an oath letter, copy of the notice with acknowledgment receipt, photocopy of the memo, and the bounced cheque must accompany the complaint form.
- Court Review: Upon receiving the complaint, the judicial court examines and verifies the submitted documents.
- Summons Issuance: Once satisfied, the court issues a summons to the accused to appear in court.
- Non-Appearance Consequences: Failure to appear in court may lead to the issuance of a bailable warrant against the accused.
Note: It is advisable to seek legal assistance from lawyers familiar with the cheque bounce case process to ensure proper filing and adherence to legal requirements.
How to Issue a Cheque Bounce Notice
If you’ve received a bounced cheque, you have the right to pursue legal action against the issuer. The first step is to send an official notice to the issuer, requesting payment of the outstanding amount. Here’s a guide on how to issue a cheque bounce notice:
1. Create a Demand Notice: Begin by drafting a notice for the bounced cheque. Include essential details such as the cheque number, amount, reason for the bounce, and a demand for payment.
2. Send the Notice: Dispatch the notice to the issuer via registered post or hand delivery. Ensure you retain proof of delivery for your records.
3. Await Response: Once the issuer receives the notice, they have 15 days to make the payment. If they fail to do so, you can proceed with legal action.
It’s crucial to have cheque bounce notices prepared and sent by a legal professional or someone familiar with the relevant legal procedures.
Cheque Bounce Notice Format
A cheque bounce notice serves as a formal demand for payment of the amount due on a bounced cheque. Here’s a standard format for such a notice:
- Your name and address
- Date of the notice
- Name and address of the cheque issuer
- Details of the bounced cheque, including cheque number, date of issue, amount, and reason for bounce
- Demand for payment within 15 days from the notice date
- A warning of legal action if payment is not received within the specified period
Note that the format may vary based on specific circumstances and legal requirements.
Reasons for Cheque Bounce in India
Cheques may bounce due to various reasons, including:
Insufficient Funds: When the payer’s account lacks sufficient funds, resulting in a bounced cheque.
Signature Mismatch: If the signature on the cheque differs from the bank’s records, it may lead to rejection.
Incorrect Account Number: Writing an incorrect account number on the cheque can cause it to bounce.
Damaged Cheque: A damaged or defaced cheque may be rejected by the bank.
Dated Cheque: Presenting a cheque after its written date can result in a bounce.
Stop Payment Instruction: If the payer requests the bank to stop the cheque payment, it will bounce accordingly.
Rules for Handling Cheque Bounce Cases
When initiating a cheque bounce case, certain rules must be adhered to:
- Send Demand Notice: The initial step is to dispatch a demand notice to the offender.
- Payment Deadline: Upon receipt of the notice, the offender is granted 15 days to settle the outstanding payment.
- Notice Under Section 138: As per Section 138 of the Negotiable Instruments Act, 1881, the payee must serve the drawer a notice within 30 days of receiving the cheque return memo.
- File Complaint: If the drawer fails to comply with the payment, the individual filing the cheque bounce case is entitled to lodge a complaint with the court, accompanied by a written complaint and relevant documents.
- Importance of Cheque Return Memo: The bank’s cheque return memo holds significant importance, as the court cannot proceed with the case without this document.
- Exception: The defaulter cannot be penalized under cheque bounce laws if the bounced cheque was presented as a gift or used to lend money for a loan payment.
New Cheque Bounce Regulations in India
Recently, the Reserve Bank of India (RBI) introduced new regulations concerning cheque bounce:
- Minimum Balance Requirement: Customers frequently using cheques or those intending to use them must maintain a minimum bank balance. Failure to maintain this balance will result in bounced cheques, with the individual who wrote the cheque potentially facing penalty charges.
- National Automated Clearing House (NACH): The RBI updated the National Automated Clearing House (NACH) as part of these reforms. This initiative aims to expedite and enhance the overall process of cheque clearance.
- Applicability: These regulations are applicable to all public and commercial banks. The objective is to ensure smoother cheque processing by making NACH operational every day of the week, including Sundays.
Scenarios Leading to Cheque Bounce
A cheque bounce notice is issued when a presented cheque fails to clear due to insufficient funds. It compels the issuer to settle the amount, prompting the issuance of a notification regarding the bounced cheque. However, before sending out a cheque bounce notification, certain prerequisites must be met:
- The cheque must have been presented to the bank within its three-month validity period.
- The cheque should be returned by the bank due to insufficient funds, a signature mismatch, or other reasons.
- The notice must be dispatched within 30 days of receiving notification of the cheque bounce.
Once these conditions are fulfilled, the issuance of a cheque bounce notice can proceed.
Process of Issuing a Cheque Bounce Notice
When a cheque bounces, the payee has the legal option to recover the due amount from the drawer. The initial step involves issuing a cheque bounce notice to the drawer within 30 days of the cheque’s dishonor. This notice should be in writing and include the following details:
- Name and address of the payee
- Date and number of the bounced cheque
- Amount of the bounced cheque
- Reason for dishonor
- Demand for payment within 15 days of receiving the notice
The notice can be delivered to the drawer in person or via registered post. Failure to comply with the notice within the stipulated time allows the payee to file a cheque bounce suit against the drawer in the court of the Judicial Magistrate.
Jurisdiction
The cheque bounce suit can be filed in the magistrate’s court where the bank branch where the cheque was deposited is located.
Process of Cheque Bounce Suit
- Filing a Complaint: The payee submits a written complaint to the court of the Judicial Magistrate, including details such as names, addresses, cheque particulars, dishonor reasons, and relevant documents.
- Issuance of Summons: The magistrate issues a summons to the drawer, mandating their appearance in court to respond to the charges on a specified date.
- Drawer’s Appearance: The drawer must appear in court on the specified date, facing possible arrest warrants if they fail to appear.
- Examination of Parties: The magistrate examines both the complainant and the drawer, allowing for plea submissions.
- Judgment: Depending on the plea and evidence presented, the magistrate may convict the drawer, imposing penalties such as imprisonment or fines, or dismiss the case if found not guilty.
Required Documents for a Cheque Bounce Case
When initiating a complaint in a cheque bounce case, certain documents need to be submitted along with the application form:
- The original bounced cheque.
- Cheque return memo containing reasons for non-payment by the bank.
- Copies of the demand notice and original receipts.
- An affidavit providing supporting evidence.
Legal Action in a Cheque Bounce Case
Cheque bounce constitutes a criminal offense in India, as stipulated under Section 138 of the Negotiable Instruments Act of 1881. If found guilty, the defaulter can face imprisonment for up to two years and/or a fine, which can be double the cheque amount. In severe cases, the court may impose additional penalties.
Contents of a Cheque Bounce Notice
A cheque bounce notice should contain the following details:
- Cheque particulars, including number, date of issue, amount, and the bank involved.
- Reasons for the bounce, such as insufficient funds or signature mismatch.
- Demand for payment, including principal amount, interest, and any applicable charges.
- Intimation of legal action if payment is not received within the specified timeframe.
The notice must be sent via registered post, and the sender should retain proof of delivery.
It’s crucial to meticulously draft the cheque bounce notice to ensure compliance with legal requirements and inclusion of all pertinent information. Seeking guidance from legal experts is advisable for resolving queries and drafting the notice accurately. Our team is equipped to assist in this process, ensuring the notice conforms to legal standards.
Cheque Bounce Charges by Various Banks
The terms “dishonoured cheque” or “cheque bounce” denote when a bank refuses to honor a presented cheque, typically accompanied by a set fee charged to the customer. Here’s a breakdown of cheque bounce charges by different banks:
| Bank Name | Type of Account | Charges for Local Cheques | Charges for Outstation Cheques | Charges for Cheque Return |
|---|---|---|---|---|
| SBI | All | Cheque/bill up to ₹1.00 lakhs – ₹150/- + GST Cheque/bill above ₹1.00 lakhs – ₹250/- + GST | N/A | Cheque returned charges for Cheques drawn on SBI (for insufficient funds only) (for all segments) – ₹500/- + GST Cheque returned charges for Cheques drawn on SBI (for technical reasons) for all segments when the customer is at fault – ₹150/-+ GST |
| HDFC Bank | Savings Account | Outward: ₹100/- Inward: First cheque return in a quarter – ₹350/-. From second cheque return in the same quarter – ₹750/- per return | Outward: ₹100/- Inward: ₹350/- | Dishonour of Outstation Cheques Regular Savings – Outward: ₹100/- Inward: ₹350/- Senior Citizen Account – Outward: ₹80/- Inward: ₹350/- |
|  | Current Account | Outward: ₹50/- Inward: ₹300/- | Outward: ₹50/- Inward: ₹300/- | N/A |
| ICICI Bank | All | Cheque deposited by the customer – ₹100/- (for every cheque return for financial reasons) Cheque issued by the customer – ₹350/- (for one cheque return per month); ₹750/- per return in the same month for financial reasons. ₹50/- for non-financial reasons except for signature verification for every cheque return for financial reasons. | Outstation cheque deposited by the customer – ₹150/- + other bank charges at actuals per cheque. | N/A |
| Axis Bank | All | Return of cheques deposited at the home branch for local clearing – ₹500/- per cheque | N/A | N/A |
| Bank of Baroda | All | Cheque (deposited by BOB’s customer and returned unpaid (Inward Return) Up to ₹1 lac – ₹125/- Above ₹1 lac to less than ₹1 crore – ₹250/- Above ₹1 crore – ₹500/- | N/A | Cheque (drawn on BOB) returned (Outward Return)– (Financial Reason) Up to 1 lakh – ₹250/- Above ₹1 lakh to less than ₹1 crore – ₹500/- For ₹1 crore and above – ₹750 per instrument In case the bank remains out of funds; actual interest @ 7.5% over base rate is to be charged extra For other reasons – ₹250/- |
These charges may vary based on account type, cheque amount, and specific circumstances. It’s advisable to verify with the respective bank for the most accurate and updated information.
Responding to a Cheque Bounce Case
When facing a cheque bounce case, your initial response is crucial. Here’s a guide on how to effectively respond:
Consult a Lawyer: Before responding to the legal notice, seek advice from a lawyer specializing in cheque bounces. They can guide you on the best course of action.
Payment or Defence: Consider either paying the cheque amount or preparing your defence. Paying the amount can resolve the issue promptly. However, if you choose to defend, ensure your response addresses key points.
Addressing the Legal Notice: While the format for the response is flexible, ensure to cover the following aspects:
- Send the response to the drawee’s attorney.
- Include your name, address, and a brief description of yourself.
- Provide details regarding the issue, including the cheque return memo.
- Address any criticisms leveled against you.
- Refrain from admitting any accusations without proper evidence.
- Present any complaints against the cheque beneficiary.
- State your defence against the allegations in the legal notice.
- Use a legal letterhead for all correspondence.
Legal Consequences of Non-Response: Failure to respond or pay the cheque amount within 15 days empowers the drawee to file a complaint with the court, initiating legal proceedings against you.
How a Lawyer Can Assist in Drafting Cheque Bounce Notice Format
Drafting a cheque bounce notice requires precision and legal expertise. Here’s how a lawyer specialized in cheque bounce cases can help:
- Legal Expertise: Lawyers possess the necessary knowledge to draft a legally sound notice.
- Information Gathering: They gather crucial information and tailor the notice accordingly.
- Guidance Towards Justice: Lawyers ensure that your response aligns with legal requirements, guiding you towards achieving justice.
- Efficient Handling: Legal professionals manage all legal documentation efficiently, ensuring a smooth process.
Hiring an experienced cheque bounce lawyer is essential to ensure the proper drafting and delivery of the legal notice, considering potential litigation that may ensue.
Parties Involved in a Cheque Transaction
- Drawer: The person who writes the cheque, also known as the ‘author of the cheque.’
- Payee: The party to whom the cheque is payable, typically the recipient of the payment.
- Drawee: The bank responsible for paying the amount stated on the cheque.
- Payee’s Bank: The bank where the payee holds an account and where the cheque amount is deposited or credited.
Remedies Against Cheque Bounce
Resubmission of Cheque: If a cheque fails due to various reasons such as overwriting, incorrect signature, discrepancies between written and numerical amounts, or damage, the payee can request the drawer to issue another cheque to rectify the error. If the drawer refuses, the payee may resort to filing a civil lawsuit to recover the full amount of the bounced cheque, not just the bounced cheque fee.
How Can a Lawyer Help Draft a Cheque Bounce Notice Format?
- Legal Representation: A cheque bounce notice must be issued through an advocate or legal counsel representing the concerned party.
- Specialized Expertise: Given the complexities of cheque bouncing cases, it’s crucial to engage a specialized lawyer.
- Initiating Legal Action: Issuing a cheque bounce notice signifies the initial step toward potential litigation, requiring legal expertise.
- Optimal Legal Representation: To ensure effective legal representation, securing the services of a cheque bounce lawyer is highly recommended.
- Legal Acumen: Experienced lawyers possess the necessary legal knowledge to draft notices and gather vital information.
- Handling Legal Paperwork: A skilled cheque bounce lawyer can proficiently handle all legal documentation associated with such cases.
- Effective Legal Proceedings: Engaging an adept lawyer is pivotal in ensuring proper dispatch of legal notices and appropriate handling of legal proceedings.
Important Points for Cheque Bounce Notice
Before sending a legal notification for a bounced cheque, certain considerations are essential:
- Documentation: Retain original copies of the cheque and return memo securely.
- Mode of Sending: Legal notification for a bounced cheque can be sent via registered post, email, or through an advocate.
- Legal Requirements: Ensure compliance with Section 138 of the Negotiable Instrument Act, 1881, specifying the person to whom the notice is addressed and the amount for which the cheque was dishonored.
- Statute of Limitations: The statute of limitations for a legal notification starts when the cheque is presented for encashment. It’s advisable to include notice period information in the legal notice.
By adhering to these guidelines and seeking legal assistance, individuals can effectively navigate cheque bounce cases and pursue appropriate legal remedies.
Why Choose Trademarkwala?
At Trademarkwala, we are dedicated to simplifying the legal process for cheque bounce cases in India. Here’s why you should consider us:
- Transparent Pricing: We do not charge any additional fees, ensuring clarity and affordability.
- Confidentiality: Your personal information is treated with the utmost confidentiality and security.
- Access to Top Legal Experts: Gain access to the finest legal professionals who specialize in cheque bounce cases.
- Expert Guidance: Our experienced experts will evaluate your situation and provide tailored advice for the best course of action.
Note: Whatever your concerns may be, our experts are here to assist you every step of the way, ensuring a smooth and effective resolution.