Cheque Bounce Case: All you need to Know
What is Cheque Bounce?
When a person gives a cheque to another person and the cheque-holder visits the bank in order to get his money but the bank does not accept the cheque due to insufficient balance of the payee or in case his signature did not match or he might have given instructions to the bank for not honouring his cheque, the cheque-holder or drawee could proceed against the defaulter.
Under the Section 138 of The Negotiable Instruments Act, legal action can be taken against him. A demand notice has to be issued within 30 days to the defaulter. This demand notice instructs the defaulter to pay back the amount. If the person fails to pay the amount within 15 days after sending him the demand notice, a cheque bounce case could be filed against him. The cheque bounce case could be filed where the cheque was submitted for honouring.
So, the drawee can file a cheque bounce case but he can also use lawyers for this work. The magistrate has to examine the complaint. A cheque bounce case can be filed against even a firm or a company.
The following documents are required before filing a cheque bounce case:
- Original cheque and return memo.
- Evidence affidavit.
- Copy of the original postal receipt and notice.
Material alteration of cheque
Any alteration in the original state of a cheque such as an amount, payee’s name, changing the name of the drawee or paying bank is called material alteration. All material alteration must have drawer’s approval with his full signature (not initials) where the alterations are made.
The following are not considered as material alteration under The Negotiable Instruments Act:
- Conversion of blank endorsement into a special endorsement (section49).
- Filling up of the incomplete instrument (section 20).
- Qualifying or limiting an acceptance (section 86).
- The crossing of a cheque by the holder (section 125).
After the dishonour of the cheque if any material alterations are made on the cheque, then the drawee cannot file a cheque bounce case.
See more: How to find good lawyers
Penalty and Punishment
If the drawer pays within 15 days, then it is well and good. Otherwise, the payee can file a complaint in court within one month from the date of expiry of 15 days, given the notice.
If the defaulter is found guilty in the court, the monetary penalty could be of twice the amount of the original amount or imprisonment of two years or less. The bank has also the rights to close the account or stop the cheque book facility.