Consequences of Cheque Bounce Notice

Cheque bounce notices carry significant legal ramifications, as per Section 138 of the Negotiable Instruments Act, 1881. Offenders might face severe penalties such as paying a fine up to double the cheque's value, imprisonment for up to two years, or both. A cheque is said to bounce if it's returned unpaid due to insufficient funds when presented to the bank.

A multitude of reasons can cause a cheque to bounce, yet if it's due to insufficient funds, the act is considered illegal. In such cases, the bank issues a memo explaining the rejection due to insufficient funds. Subsequently, the holder of the cheque has the legal right to send a cheque bounce notice demanding the drawer clears the amount.

New Rule Regarding Cheque Bouncing

In August 2021, the Reserve Bank of India (RBI) implemented a new regulation impacting clients who extensively use cheques. This rule requires maintaining a minimum account balance to prevent cheque bounces. If a cheque is dishonored due to insufficient funds, the issuer could incur a penalty fee. Moreover, the RBI has ensured the National Automated Clearing House (NACH) operates 24/7, enhancing the cheque clearance process.

This rule applies across national and private banks, aiming to streamline and expedite cheque processing. With NACH's extended operational times, cheque clearance is more efficient, including weekends.

Different Circumstances Leading to Cheque Bounce

Multiple factors can lead to a cheque bounce:

• Insufficient Funds: A cheque will bounce if the account lacks adequate funds.
• Cheque Validity: Cheques presented after three months from issuance are invalid.
• Overwriting: Any overwriting could result in a cheque bounce.
• Damage: Cheques that are physically damaged or unclear may be dishonored.
• Signature Mismatch: Discrepancies in signatures can cause bounces.
• Amount Mismatch: Any difference between the amount in words and figures can result in dishonor.

Available Remedies Against Cheque Bounce

If an issue like overwriting or signature mismatch leads to a cheque bounce, the holder can ask for a fresh cheque. If denied, civil proceedings might be initiated to retrieve the cheque value, excluding bounce fees. Under Section 138, a cheque bounce notice is applicable only for insufficient funds.

Process of Issuing a Cheque Bounce Notice

To initiate action for insufficient funds, a written cheque bounce notice must be issued via post within 30 days of bank intimation. The drawer is granted a 15-day window post-receipt to clear the cheque value. Failure to comply empowers the payee to pursue legal proceedings within 30 days after this period.

Note: Cheques issued as gifts or donations are exempt from bounce notices unless they fulfill a legally binding obligation.

Responding to a Cheque Bounce Case

Proper response is crucial in cheque bounce cases. A reply or payment can prevent legal proceedings. Consulting a lawyer specialized in such cases ensures appropriate guidance. Settling early by paying the cheque can avert complex legal implications.

No strict format exists for responses but should include:

• Address to the drawer's lawyer.
• Authored on a lawyer's letterhead.
• Personal identification details.
• Incident facts and dates.
• Countering allegations.
• Complaints against the drawer.
• Defense summary.

Lack of response or payment within 15 days can lead to legal actions by the drawee.

In lawsuits, filing must occur within 30 days past the 15-day limit, with jurisdiction options including the cheque's drawing, presentation, payment, bouncing, or notice location.

Cheque Bounce Suit Process

1. The complaint is filed with the Magistrate after 15 days post-notice.
2. Details are presented, leading to potential summons issuance if justified.
3. The drawer attends court to affirm or contest the complaint.
4. Statements, evidence, and arguments are exchanged.
5. A guilty verdict may result in fines or imprisonment.
6. Civil cases aim solely for monetary recovery without penalties.

Cheque bounce notices may target companies as well, where both company and directors could face charges under Section 148.

Payment within 15 days following the notice nullifies further actions under Section 138.

A thorough understanding of cheque bounce consequences and legal channels benefits both parties in protecting their rights efficiently.