Cheque bounce is a situation when the bank refuses to make the payment against the cheque presented for encashment, due to number of reasons stated herein below;

• Insufficient Funds: Most popular reasons for cheque bounce are insufficient funds in the bank account of person who issued the cheque.
• Credentials mismatch: There is overwriting on cheque, the signatures doesn’t match or any case where bank cannot verify the credentials on the cheque.
• Stop Payment: Drawer of the cheque seek instructions to stop payment being made against the cheque.
• Period Expired: When the cheque is not presented within the prescribed period of 3months of its date, the same is returned as expired.
• Partially filed: In case of name or details upon the cheques not filled in complete form, the same are returned back.

Cheque bounce due to insufficient funds and stop payment in the account of drawer causes lots of distress in business and hence are treated at par. The lawmakers have made the process of recovery of money from bounced cheques extremely linear and step-wise. The section of law that deals with cheque bounces is section 138 of Negotiable Instruments (Amendment) Act 2018.

Since cheques are most popular form of payment adopted by business and duly encouraged by government for maintaining transparency, the recent amendments in law has made it very strict, harsh and stringent to punish cheque bounce cases in non-payment of recoverable dues. In case of cheque bounce or dishonour due to credential mismatch, the payee is required to fetch a fresh cheque with correct details from the drawee and resubmit it in the bank for clearance. If the drawer refuses to reissue fresh cheque despite admission on his part, the payee can opt to file a criminal complaint as well as civil case against him.

Reading the whole NI Act for cheque bounce and trying to understand the procedure of cheque bounce money recovery can be confusing, perplexing and tiresome. So we have made this extremely simple “step by step guide” to understand the procedure of how to proceed with cheque bounce recovery.

FACING CHEQUE BOUNCE SITUATION

When someone gives you a cheque you have to submit the cheque into your bank to get the payment. In case a cheque is bounced you get a notification from the bank which mentions the reason of the bounce, the reason of the cheque bounce plays an important part in recovery proceeding, to realize the benefits of section 138 of the NI act the reason of the cheque bounce should either be stop payment or insufficient funds. In such cases you have to follow a certain procedure to ensure you get your money quickly. Requirements to be fulfilled for cheque bounce recovery through section 138 of the NI Act.

In order to apply for speedy recovery of money in cheque bounce cases through section 138, the payee must ensure that the following conditions are met:

• The drawer must have drawn the cheque on a bank account maintained by him/her.
• The cheque should have been issues in discharge, in whole or in part, of any debt or other liability.
• The cheque should have been presented to the bank within its validity period.
• The cheque should have been bounced only due to insufficient funds or stop payment.
• The payee makes a demand for payment (cheque bounce notice) within 15 days from dishonour of the cheque.
• The drawer has failed to make the payment of the cheque amount within 30 days of receipt of the notice.
• The complaint should have been filed within one month from the expiry of 30 days mentioned in the demand notice of reminder of payment.

 CHEQUE BOUNCE CASES PROCEDURE STEP-BY-STEP

To recover the money stuck due to a cheque bounce, section 138 of The Negotiable Instruments (Amendment) Act 2018 recommends the following procedure:

 Step 1) Cheque is required to be submitted by holder for encashment in the bank and in case of the dishonour of the same, the payee has to recollect the returned cheque along with cheque return notification slip stating reasons of such rejection with date and stamp.

 Step 2) Payee/Holder has to send a legal notice mentioning the relevant transaction details along with cheque number, reason of bounce and amount to the drawer at his address within 30 days from the date of the dishonour of the cheque and asking him to pay the due amount within 15 days of sending such notice.

 Step 3) In case the payment is not made within 15 days the payee can file a complaint against the drawer under Section 138 of The Negotiable Instruments (Amendment) Act 2018. The complaint should be filed with 30 days of the end of notice period in front of the competent jurisdiction.

 Step 4) Once the petition is filed in the court, if the court finds it as per rules, summons are issued against the drawer. The drawer has to present himself in the court and file an appearance through his advocate. The drawer is required to put their side of the case and the court will take a decision based on proofs and evidence presented by both the parties. Generally, if the payee has a valid contract and bounced a cheque, the cheque bounce cases are held in favour of payee. If the drawer doesn’t present himself in the court, the court can go to the extent of issuing an arrest warrant against him.

 Make sure to double check the following details in the notice

• Date of cheque bounce.
• Amount in the cheque.
• The demand should be within 30 days of the issue of the notice.
• Cheque number/reference number and other cheque details.
• Reason for cheque bounce.
• Attach a copy of cheque and bank notification memo.

 ASSISTANCE IN CHEQUE BOUNCE CASE

If the drawer doesn’t make complete payment within 15 days of the legal demand notice, the payees has the right to move to the Hon’ble Court with the legal assistance to file the case against the drawer. We at Cheque Bounce Advisor (CBA) provide complete assistance, guidance and supervision to our clients. Our expert team members work PAN India with proper documentation tools for minimum errors and objections in such filing. All legal, formal, mandated and other formalities are taken extra care off by our dedicated Legal Team Members for speedy and time bound money recovery assistance.