Cheque bounce, also known as dishonoured cheque, is a common problem faced by individuals and businesses in India. When a cheque is issued, it is expected to be honoured by the bank and the payment made to the recipient. However, if the cheque is dishonoured due to insufficient funds, technical errors, or other reasons, it can lead to legal consequences for the issuer of the cheque. In this article, we will explore the legal implications of cheque bounce and the remedies available to the recipient.
Legal Definition of Cheque Bounce
Section 138 of the Negotiable Instruments Act, 1881 provides the definition of cheque bounce.According to the Act, a cheque is said to be dishonoured or bounced if it is presented for payment to the bank, but the payment is refused due to insufficient funds in the account, or if the amount exceeds the limit of the account, or if the signature on the cheque does not match the bank records, or if the cheque is post-dated, or if it is stale.
Consequences of Cheque Bounce
Cheque bounce is a criminal offence under the Negotiable Instruments Act, and the issuer of the cheque may be liable for prosecution. The legal consequences of cheque bounce can include imprisonment for up to two years, payment of a fine, or both. In addition, the issuer may be liable to pay compensation to the recipient for any losses suffered due to the dishonoured cheque.
The legal consequences of cheque bounce can have a significant impact on the financial stability and reputation of individuals and businesses. A bounced cheque can result in legal fees, penalties, and a damaged credit score, which can affect their ability to obtain loans or conduct business transactions in the future.
Remedies Available to the Recipient
If a cheque is bounced, the recipient has several legal remedies available to them. The first step is to issue a notice of demand to the issuer of the cheque, demanding payment of the amount due within 15 days of the receipt of the notice. If the issuer fails to make the payment within the stipulated time, the recipient may take legal action.
The legal remedies available to the recipient include:
Filing a Civil Suit: The recipient may file a civil suit for recovery of the amount due along with interest, damages, and legal costs. The civil suit can be filed in a civil court having jurisdiction over the matter.
Filing a Complaint with the Banking Ombudsman: If the cheque was dishonoured due to a mistake or negligence on the part of the bank, the recipient may file a complaint with the banking ombudsman. The ombudsman will investigate the matter and determine whether the bank has acted in accordance with the banking laws and regulations.
Filing a Case under the Negotiable Instruments Act: The recipient may file a case under Section 138 of the Negotiable Instruments Act, which provides for criminal prosecution of the issuer of the cheque. The court will hear the case and determine whether the issuer is guilty of cheque bounce.
Role of Judiciary
The role of the judiciary is crucial in enforcing the legal remedies available to the recipient of a bounced cheque. The courts play an important role in determining the liability of the issuer and the compensation due to the recipient.
In case of a civil suit, the court will hear the case and determine the amount due to the recipient, including interest, damages, and legal costs. If the court finds that the issuer is liable, it may order the issuer to pay the amount due to the recipient.
If the recipient files a case under the Negotiable Instruments Act, the court will hear the case and determine whether the issuer is guilty of cheque bounce. If the court finds the issuer guilty, it may impose a fine or imprisonment, or order the issuer to
Pay Compensation to the Recipient
In recent years, the judiciary has taken steps to expedite the process of cheque bounce cases. The Supreme Court has directed the lower courts to dispose of cheque bounce cases within six months from the date of filing of the complaint. The courts have also introduced measures such as online case filing, video conferencing, and fast-track courts to expedite the disposal of cheque bounce cases.
Cheque bounce is a serious problem that affects individuals and businesses in India. The legal consequences of cheque bounce can be severe, and it is important for individuals and businesses to be aware of the legal remedies available to them. The role of the judiciary is crucial in enforcing the legal remedies available to the recipient of a bounced cheque. The courts play an important role in determining the liability of the issuer and the compensation due to the recipient.
To avoid cheque bounce, it is important to ensure that there are sufficient funds in the account before issuing a cheque. It is also important to ensure that the signature on the cheque matches the bank records and that the cheque is not post-dated or stale. By taking these precautions, individuals and businesses can avoid the legal and financial consequences of cheque bounce.