Know your Legal Guide if your Cheque is Bounced or Dishonoured And Difference Between Cheque Dishonoured and Cheque Bounce
A cheque is a written document to a bank to pay the stated amount of person’s account(Drawer) to the person(Payee) in whose name the cheque has been issued. the bank should pay the stated amount from the drawer’s account to the payee, this is called the cheque is honoured. If the bank refuses to pay the amount mentioned on the cheque to the payee, it is called Dishonoured of the cheque.
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SOME REASON WHY YOUR CHEQUE IS DISHONOURED
- INSUFFICIENT FUNDS
- IRREGULAR SIGNATURE
- ALTERATION
- POST DATED CHEQUE
- STALE CHEQUE
- FROZEN ACCOUNT
- WHEN PAYMENT IS STOPPED
Now a days cheques are used in almost all transactions. A cheque is a negotiable instrument. The cheques have to be deposited into the payee’s bank account.
Differences Between Cheque Dishonoured & Cheque Bounce:
The concept of cheque dishonoured & cheque bounce is nearly the same but there has only one difference is that cheque dishonoured due to irregular sign, wrong date etc, but cheque bounce occurred only due to insufficient funds.However, cases of cheque bounce are common these days sometimes cheques remain unpaid. If the cheque issuer fails to make a fresh payment within 30 days of receiving the notice, the payee has the right to file a criminal complaint under section 138 of the Negotiable Instrument Act. However, the complaint should be registered in a magistrate’s court within a month of the expiry of the notice periods.
Guide to the legal procedure step by step(if the cheque is dishonoured/ bounced):
When a cheque is dishonored the bank immediately issues a ‘Cheque Return Memo’ to the banker of the payee and mentioning the reason for nonpayment. The holder or payee can resubmit the balance within the 3 months (90 days) of the date on it. If the cheque issuer fails to make the repayment. Then the payee has the right to prosecute the drawer legally.If the cheque was issued as a gift, lending a loan, for any unlawful purposes, then the drawer cannot be prosecuted in such cases.
According to section 138 of the Negotiable Instrument Act, dishonoured of the cheque is a criminal offense its punishable by imprisonment for up to two years with a penalty, which is twice the cheque amount.
- If payee decided to procced a legal action, the drawer has to give a chance of repaying the cheque amount
- This chance has to be given only through the written notice.
- The payee has to send a notice to the drawer with 30 days from the date of receiving ‘cheque return memo’
- This should be mentioned on the notice that the cheque amount has to be paid the payee within the 15days from the date of the receipt.
- If the drawer fails to make a fresh payment within 30 days of receiving notice.
- Then the payee registered a complaint against the cheque issuer.
- The complaint must be registered in a magistrate’s court within a month of the expiry of the notice period…..
Some essential condition for the prosecution:
- The cheque should be drawn by the drawer on an account maintained by the drawer.
- The cheque should be returned because of insufficient funds in a drawer account.
- The cheque is issued towards discharging the of legal liability.
- After receiving notice, if the drawer doesn’t make the payment within the stipulated time periods.
Punishment &Penalty:
According to section 138 of the Negotiable Instrument Act, dishonoured of the cheque is a criminal offense its punishable by imprisonment for up to two years with a penalty, which is twice the cheque amount.
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