Date : 07-02-2019 11:26
What is the frame in which a cheque bounce case is resolved in India under section 138?
What is a check?
A “cheque” is a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand and it includes the electronic image of a truncated cheque and a cheque in the electronic form.
What is a Bounced Check?
A bounced check is slang for a check that cannot be processed because the account holder has nonsufficient funds. Banks return, or bounce, these checks, also known as rubber checks, rather than honoring them, and banks charge the check writers NSF fees. Passing bad checks can be illegal, and the crime can range from a misdemeanor to a felony, depending on the amount and whether the activity involved crossing state lines.
Many times, bad checks are written inadvertently by people who simply are unaware that their bank balances are too low. To avoid bouncing checks, some consumers use overdraft protection or attach a line of credit to their checking accounts.
What Happens When
a Check Bounces?
Bank fees are just one part of bouncing a check. In many cases, the payee also assesses a charge. For example, if someone writes a check to the grocery store and the check bounces, the grocery store may reserve the right to redeposit the check along with a bounced check fee.
Section 138 Dishonour of cheque for insufficiency, etc., of funds in the account:
Where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall, without prejudice. to any other provision of this Act, be punished with imprisonment for a term which may extend to two years, or with fine which may extend to twice the amount of the cheque, or with both:
Provided that nothing contained in this section shall apply unless-
(a) the cheque has been, presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier;
(b) the payee or the holder in due course. of the cheque as the case may be, makes a demand for the payment of the said amount of money by giving a notice, in writing, to
the drawer of the cheque, within thirty days of the receipt of information by him from the bank regarding the return of the cheque as unpaid; and
(c) the drawer of such cheque fails to make the payment of the said amount of money to the payee or, as the case may be, to the holder in due course of the cheque, within fifteen days of the receipt of the said notice.
Explanation.-For the purposes of this section, “debt or other liability” means a legally enforceable debt or other liability.
OFFENCE UNDER SECTION 138
*The cheque should have been issued for the discharge , in whole or part, of any debt or other liability.
*The cheque should
have been presented within a period of six months or within its validity period
whichever is earlier.
*The payee or
holder in due course should have issued a notice in writing to the drawer
within 30 days of the receipt of information by him from the Bank regarding the
return of the cheque as unpaid.
*After receipt of the said notice from the holder in due course, the drawer should have failed to pay the cheque within 15 days of receipt of the said notice.
What are the
Documents required for filing Complaint under section 138 of Negotiable
Instruments Act 1881?
The following basic documents are necessary to file Complaint under section 138 of Negotiable Instruments Act.
1. Memo of Parties
2. Complaint U/S 138 Negotiable Instruments Act, 1881
3. Pre-Summoning Evidence/ By Way Of Affidavit (in some courts)
4. List of Witnesses
5. List of Documents with Documents
6. Vakalatnama in favour of the Counsel
When a cheque is returned unpaid one should not
wait to get the payment according to the convenience of the party issued
the cheque. If necessary formalities are not completed within the time limit,
the chances of recovering the amount will cease. Following are the
procedure to send notice to the debtor and file complaint with court.
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