Dishonour/Bouncing of a Cheque
"An act, that will blot you as a criminal!"
Cheque Bounced! Need an Advocate/Consultant for Dishonouring of Cheque! Where to go and what to do in case where cheque is bounced. We are here, at Prospect Legal to serve you with the Consultancy, Litigation and Due-diligence services for Cheque-bounce in Bhopal and all over Madhya Pradesh.
One of the most viable modes of payment in this era of globalization & mobility is via. Cheque. Be it a commercial purchase, various payments, salary, contracts or other transactions , a cheque can be used almost in every strata of business & commerce. However, have you ever wondered what happens if your cheque gets bounced! It’s a case which should actually makes you mull over it’s possible consequences, since it will not only gives a blow to your goodwill but also leads you to a criminal liability. So, make yourself well- versed of this concept and secure your move for the future- payments. The Law of Negotiable Instruments Act,1881 currently regulates the cases of dishonour of Cheque in India.
What is dishonour of a cheque?
It’s basically the bouncing of cheque!
The bank should pay the amount mentioned on the cheque as soon as it is presented. If the amount of cheque is paid by the bank to the payee, the cheque is said to be honoured. If the bank refuses to pay the amount of cheque, then the cheque is said to be dishonoured. Thus, the dishonour of the cheque means the refusal by the bank to pay the amount of cheque to the payee. It is a condition in which the bank does not pay the amount of the cheque to the payee. In fact, when the drawer draws the cheque without following all the rules of issuing cheque or when he/she draws the cheque exceeding the bank balance then the bank dishonours the cheque.
In what cases a cheque will be dishonoured?
As per section.138 of Negotiable Instruments Act,1881 the cases of dishonour of cheque which attract criminal liability are:
- Dishonour due to Insufficient funds in the account
- Amount mentioned in the cheque is more than the overdraft limit
Who can file a complaint?
A complaint under section 138 can be made only by:
Complaint has to be in Written, only.
Liability/Consequences of Dishonour?
The person (drawer) whose cheque got dishonoured by the bank shall be deemed to have committed an offence and he/she shall without prejudice to any other provision of the Negotiable Instruments Act, 1881 be punished with :
- Imprisonment for a term which may extend to 2 years; or
- with fine , which may extend to twice the amount of the cheque ; or
With both ,fine and imprisonment
Liability in case of a Company
Section 141 of the Act provides three categories of persons which can be brought within the purview of the penal liability for the offence of dishonour of cheque. They are
- The Company , which committed the offence;
- Everyone who is in-charge of and is responsible for the business of the company;
- Any other person who is a Director or a Manager or a Secretary or the Officer of the company with whose connivance or due to whose negligence the company has committed the offence.
Hence, when a company is the drawer of the cheque, the company is the principal offender, and the remaining persons are made offenders by the virtue of the legal fiction created as per Section 141. The actual offence should be committed by the company and then only the other two categories would also become liable for the offence.
Cognizance of the offence (Time period to file a complaint);
As per section 142, Complaint can be made within 1 month of the date on which the cause of action arises. The Court can however; further take the cognizance beyond the prescribed period, if there is a sufficient reason for not filing of complaint within such period.
Jurisdiction (Where to go?)
An offence under Section 138, which is “Dishonour of a cheque” will be triable only by either
- A Metropolitan Magistrate; or
- A Judicial Magistrate of 1st class
Further section .142A (via. 2015 amendment) states that, the case may be filed in the Court,
- if the cheque is delivered for collection through an account –Within whose local jurisdiction the branch of the bank is situated in which Payee or Holder-in-due-course maintains his/her bank account.
- In cases of Bearer cheques- within whose local jurisdiction the branch of the Drawee bank, where the drawer maintains the account is situated.
Thus, a case of dishonour has to be filed in a Court’s local jurisdiction where ,the cheque was presented for clearance or payment and not at the place of issue that is only in a court in whose jurisdiction the bank branch of the payee (person who receives the cheque) lies.
Can a case under Section 138 be compromised?
Yes, a case of dishonour of cheque can be legally compromised.
Due Diligence required for the case of Dishonoured Cheque
Presentation of Cheque
- by the payee/holder-in-due-course
- within 3 months from the date on which it’s drawn or within the period of it’s validity, whichever i s earlier
Notice of Dishonour
- Payee/Holder-in-due-course will send a Notice within 30 days about dishonour to the drawer
- Demand for the payment
Failure to pay amount
- Drawer fails to make a payment within 15 days of the receipt of Notice , above.
Cause of action arises
- The cause of action arises on the failure of payment by the drawer
- a case can be filed under section.138 of N.I.Act,1881 within 1 month from the date of cause of action
Article by: Adv. Sneha Singh (B.Com. (Hons.) & LLB)
What we can do?
Hire us, and count us on all due diligence work required under the law for filing a case of dishonour of cheque. Providing you with a sincere and worth consultancy is all what we strive here at Prospect Legal. WE can serve you from Consultancy services- to- filing of case, covering all due diligence regarding the litigation in Bhopal and all over Madhya Pradesh. Secure your future move!