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Cheque Bounce Case Procedure

Step 1: Initiate the process by sending a Demand Notice to the individual who handed you the bounced cheque.

Step 2: Ensure the notice has complete details about the bounced cheque including date of issuance and a duplicate of the dishonoured memo.

Step 3: The individual, then, has a duration of 15 days to fulfill the payment after receiving the notice.

Step 4: In the absence of payment, you have the right to lodge a complaint in the court, as per the specified format.

Step 5: In addition to the complaint form, you will be required to provide an oath letter, a copy of the notice, an acknowledgement receipt, a photocopy of the memo, and the bounced cheque received by you.

Step 6: Once the complaint is submitted in court, they will examine and verify the documents you have provided.

Step 7: After the court is assured of the authenticity of your cheque return case, you or your appointed lawyers will need to complete the 'bhatta' or cheque bounce case process form. This will be followed by a summons to the accused to appear in court.

Step 8: In the event the defendant does not show up in court, it's within the judge's power to release a bailable warrant against the concerned individual.

Important Note: Consulting and hiring legal professionals for filing a cheque return case is highly recommended. These experts, due their intricate understanding of cheque bounce procedures and appropriate legal document completion, can be invaluable for your case.

Legal Prosecution in Case of Cheque Bounce

Cheque bounce is considered a criminal violation in India, as defined by Section 138 of the Negotiable Instruments Act of 1881. Therefore, the defaulter can be legally prosecuted if a complaint is registered in court. If the offender is compliant with guilt, he/she may be sentenced to two years in prison and/or levied with a fine. This penalty can be equivalent to twice the cheque amount.

In some situations, the court may impose punishment specifically for the cheque bounce case. This circumstance typically occurs when the court rules the offence as particularly severe.

Guidelines for Cheque Bounce Cases

When filing a cheque bounce case, individuals must adhere to specific regulations.

1. Sending a Demand Notice: The process starts with sending a demand notice to the individual who issued the bounced cheque.
2. Allowances for Payment: The recipient of the notice is accorded a period of 15 days to make the outstanding payment.
3. Abiding by the Negotiable Instruments Act: In compliance with Section 138 of the Negotiable Instruments Act of 1881, the payee has a window of 30 days from the receipt of the cheque return memo to serve the drawer a notice.
4. Filing a Complaint: If the payment is not made by the drawer within the specified time, the payee holds the right to lodge a complaint in the court. This complaint has to be written and supported with relevant documents.
5. Importance of Cheque Return Memo: The cheque return memo from the bank is crucial for the proceedings. The case cannot continue in the absence of this document.
6. Exceptions: The cheque bounce law does not apply if the bounced cheque was a gift or was issued to repay a loan. In such cases, the defaulter will not face any legal penalties.

   How to Issue a Bounced Check Notice?

   If you are on the receiving end of a bounced check, you hold the legal right to act against the check issuer. The foremost step in this legal process involves sending an official bounced check notice to the issuer requesting him for payment. Following are the steps on how to issue this notice:

   Step 1: Draft a Demand Notice: Start by crafting a bounced check notice. Ensure to include key details such as the check number, total amount, reason for bouncing, and a demand for payment.

   Step 2: Dispatch the Notice: You can hand-deliver or send the notice to the check issuer via registered post to ensure receipt. Make sure you have a delivery proof.

   Step 3: Await a Reply: Post receipt of the notice, the issuer gets a grace period of 15 days to make the payment. If the issuer fails to make the payment within this time frame, you have the right to initiate legal proceedings.

   Take note: It's crucial that a legal professional or someone familiar with legal processes must draft and dispatch notices of cheque bounce.

   Cheque Bounce Conditions

   A notice for a cheque bounce is dispatched when a cheque is returned due to funds insufficiency. This notice obliges the cheque's issuer to pay the stated amount. You have the authority to send them an alert regarding the bounced cheque. However, certain criteria must first be met before sending a cheque bounce alert:

   1. The cheque must first complete its three-month validity period during which it should have been submitted to the bank.
   2. The bank should have returned the cheque due to insufficient funds, signature discrepancy, or any other valid reason.
   3. The notice should be dispatched within the first 30 days of receiving information regarding the cheque bounce.

   Upon fulfilling these conditions, you can initiate the process of issuing a notice for the cheque bounce.

   Format for Cheque Bounce Notice

   A cheque bounce notice is an official document utilized to demand the payment owed on a bounced cheque. This is a general format for a cheque bounce notice:

   • Your name and address
   • The date of the notice
   • Cheque issuer's name and address
   • Details of the bounced cheque. This includes:
   • Cheque number
   • Date the cheque was issued
   • The amount of the cheque
   • Reason the cheque bounced
   • The payment demand is to be made within 15 days of receiving this notice
   • A warning of possible legal action if the owed money isn't returned within the specified period. It's crucial to remember that the layout of the cheque bounce  notice can be adjusted based on specific situations and law prerequisites.

   Cheque Bounce Notice Elements

   A notice regarding a cheque bounce must comprise the following elements:

   • Cheque Details: Include specific information about the cheque such as its number, issue date, amount, and the bank from which it was drawn.
   • Bounce Reason: State the reason behind the cheque bounce. This may be insufficient funds, signature mismatches, or any other breaches.
   • Payment Demand: Draft a request for the total amount owed, including the primary amount, interest, and any additional fees.
   • Legal Consequence Notice: Include a warning about potential legal action if no payment is made within a set timeframe.
   • It is necessary to ensure the dispatch of the legal notice through registered post and keep a delivery proof.

   Take care while drafting a cheque bounce notice, it needs to not only contain all required details but also comply with legal norms. It would be wise to consult our Legal team for any queries about the procedure. Our team will help you draft the notice carefully.

   Penalties for Check Bouncing

   When a bank does not accept a check meant for payment, it is often referred to as a 'dishonored check' or a 'check bounce'. Furthermore, the bank imposes a specific fee on individuals who experience a check bounce.

   Local and Outstation Cheque Charges by Banks

   SBI: Charges for All Account Types

   Charges for Local Cheques

   • For cheques or bills up to ₹1.00 lakhs, the charge levied is ₹150/- + GST
   • For cheques or bills above ₹1.00 lakhs, the charge levied is ₹250/- + GST

   Charges for Outstation Cheques

   • Currently, no charges for outstation cheques

   Charges for Cheque Return are divided into two parts:

   • Cheque return charges for insufficient funds for all segments are ₹500/- + GST, regardless of the amount
   • In case of technical errors, where the customer is at fault, the returns charges are ₹150/- + GST

   HDFC Bank: Charges for Savings Account

   Charges for Local Cheques

   • Outward cheques carry a charge of ₹100/-
   • The first returned cheque in a quarter will be charged ₹350/-. If more cheques are returned in the same quarter, a fee of ₹750/- per return will be levied

   Charges for Outstation Cheques

   • Outward cheques carry a charge of ₹100/-
   • Inward cheques are charged at ₹350/-

   Charges for Cheque Return

   • Regular Savings - Outward: ₹100/- Inward: ₹350/-
   • Senior Citizen Account - Outward: ₹80/- Inward: ₹350/-

     HDFC Bank: Charges for Current Account

     Charges for Local Cheques

     • Outward cheques are charged at ₹50/-
     • Inward cheques are charged at ₹300/-

     Charges for Outstation Cheques

     • Outward cheques are charged at ₹50/-
     • Inward cheques are charged at ₹300/-
     • Presently, there are no charges for cheque returns for HDFC current account holders.

     ICICI Bank Fees:

     • Cheque deposit fee: INR 100 per cheque return due to financial reasons.
     • Cheque issuance fee: INR 350 for one returned cheque per month; INR 750 per return in the same month due to financial reasons.
     • Non-financial reasons fees: INR 50 per cheque return, excluding verification of signature for financial reasons.
     • Outstation cheque deposit fee: INR 150 + actual other bank charges per cheque.

     Axis Bank Fees:

     • Home branch cheque deposit fee in case of local clearing: INR 500 per cheque.

     Bank of Baroda Fees:

     • Inward Return Cheque Fees:
     • Up to INR 1 lakh: INR 125
     • Above INR 1 lakh and less than INR 1 crore: INR 250
     • Above INR 1 crore: INR 500
     • Outward Return Cheque Fees (Financial Reasons):
     • Up to INR 1 lakh: INR 250
     • Above INR 1 lakh and less than INR 1 crore: INR 500
     • Above INR 1 crore: INR 750 per instrument.

     In the case where the bank lacks sufficient funds, the actual interest rate is 7.5% over the base rate. For other reasons – ₹250/-

     What is the Role of a Lawyer in Drafting a Cheque Bounce Notice Format?

     Drafting a cheque bounce notice is a vital step in recovering owed money. The notice initiates the start of any legal action, so it's recommended to have an expert cheque bounce lawyer assist you. Our team of specialist lawyers is equipped to manage cheque bounce situations in various ways:

     1. Our professionals possess the necessary skills and knowledge to draft a notice that's legally robust.
     2. Our team can collect essential information relating to the client's needs and prepare the notice correspondingly.
     3. A cheque bounce lawyer ensures your actions are legally sound and consistent with pursuing justice.
     4. Our legal practitioners can efficiently manage all the required legal documents.

     The importance of hiring a seasoned cheque bounce lawyer thus cannot be overstated. By doing so guarantees that the legal notice is dispatched correctly and with full awareness of any forthcoming legal issues.

     Who are the parties involved in the cheque?

     • Cheque Drawer: Cheque drawer, also known as 'drawee,' is the individual who writes or authors the cheque. This person can also be referred to as the debtor.
     • Payee: 'Payee' denotes the individual or entity for whom the cheque is drafted and who is granted the mentioned cheque amount. The payee can also be recognised as the creditor.
     • Drawee's Bank: The 'drawee' refers to the bank that has been ordered to pay the specified cheque amount.
     • Payee's Bank: 'Payee's bank' represents the bank where the payee holds an account and where the required check amount has to be deposited or credited. This is specifically applicable in the case of a crossed cheque.

       Revised Cheque Bounce Regulations in India

       ·         A recent notification issued by the Reserve Bank of India (RBI) in early August 2021 outlined new regulations regarding the use of cheques. Accordingly, customers who frequently utilize cheques, or those who intend to do so in the future, are required to maintain a minimum bank balance. Failure to maintain this minimum balance will lead to their cheques bouncing. Individuals who issue such bounced cheques may also be liable to a penalty.

       ·         The RBI has further updated the National Automated Clearing House (NACH), which is now involved in these regulations.

       ·         These changes are applicable to all the public and commercial banks across the country. The primary objective behind implementing these new regulations is to accelerate and enhance the process of cheque clearance. To this end, the updated regulations also ensure that NACH operates seven days a week, thus facilitating the processing and passing of cheques even on Sundays.

       Causes of Check Bounce in India

       1. Insufficient Account Balance: A check will be returned by the bank to the recipient with the statement 'Insufficient funds to cover the check amount', in instances where there are inadequate funds in the drawer's account to meet the check's value.
       2. Expired Check Validity: It is mandatory for a check to be presented for payment within a span of three months following the issuance by the drawer. Checks failing to reach the bank within this stipulated time frame will be considered void, resulting in their return by the bank.
       3. Overwriting: Instances of overwriting, such as a change in the drawer's signature, the check amount, or any other proclamation result in the check bouncing.
       4. Damaged Check: Alterations, scratches, obfuscation of facts, or presence of stains or marks on a check can lead to its rejection by the bank.
       5. Signature Mismatch: If the drawer's signature is illegible, missing, or doesn't match the one registered with the bank, it will result in the check bouncing.
       6. Inconsistency in Figures or Numerals: The check will be declined if the monetary value stated in text and figures is inconsistent.

          Responding to a Cheque Bounce Case

          In dealing with a cheque bounce case, the first step is to respond to the legal notice. You can either offer your defense or pay the specified amount via cheque to avoid further legal action. Hence, it is crucial to seek advice from a lawyer specializing in cheque bounce cases before replying. Paying the cheque amount upfront can often quickly resolve the issue.

          Even though the answer to the legal notice doesn't have a fixed format, ensure that you cover the following elements:

          • Ensure the response to the legal notice reaches the drawee's lawyer.
          • State your name, address, and a short personal introduction.
          • Provide details about the problem, such as a note referencing the returned cheque.
          • Respond to the criticisms directed at you.
          • Avoid replying to any questions in the notice accusing you of any wrongdoing.
          • State any complaints against the person who received the cheque.
          • Provide a response to the allegations in the legal notice for the bounced cheque, clearly outlining your defence.

          ·         For every communication in reply to a legal notice, it is compulsory to use a legal letterhead. Please be aware, if the legal notice remains unanswered or the cheque amount is not paid within 15 days, the drawee is within their legal right to lodge a complaint with the court. This could lead legal proceedings against you.

          Solutions for Cheque Bounce

          Submitting a New Cheque:

          When a cheque bounces due to overwriting, incorrect signatures, discrepancies between the words and figures mentioned for the amount, or if the cheque is damaged, the recipient (payee) has the right to request a reissue of a fresh cheque from the issuer (drawer) to rectify the error.

           

          Civil Lawsuit:

          In situations where the drawer refuses to issue a new cheque, the payee is entitled to file a civil lawsuit in order to recover the full amount due from the original bounced cheque. Note that this includes not only the dishonoured cheque amount but the total amount owed.

           

          What role does a lawyer play in structuring a Cheque Bounce Notice Format?

          ·         An advocate or legal representation must initiate a legal action notice on behalf of the involved party. In cheque bouncing situations, it’s vital to have a specialised lawyer. The moment a cheque bounce notice is released, it signifies the beginning of potential legal processes.

          ·         To ensure the best legal support, it's suggested to employ a lawyer specialising in cheque bounce cases. Such a lawyer, with their experience and legal expertise, can accurately draft and gather important details for these notices. Additionally, a proficient cheque bounce lawyer can competently manage all the legal documentation related to these incidents.

          ·         Consequently, hiring a skilled cheque bounce lawyer is crucial for the appropriate sending of legal notices and the suitable management of legal procedures.

          Guidelines for Responding to a Cheque Bounce                                             

          In the event of a cheque bounce, it's crucial to understand the necessary steps necessary to take legal acion. Understanding these steps can greatly increase the chances of a court decision in your favor.

          Here are some key pointers for responding to a cheque bounce in a legal manner:

          1. Safeguard Original Documents:

          Ensure to securely store the original copies of the bounced cheque and the return memo.

          2. Methods of Sending Legal Notification:

          The notification regarding the bounced cheque can be conveyed through the following channels:

          • Advocate via WhatsApp
          • Registered Post Acknowledgement Due (RPAD)
          • Email
          3. Initiate a Case:

          Launch a case under Section 138 of the Negotiable Instrument Act, 1881 if you're the beneficiary of the cheque.

          When using the cheque bounce notice format, it is essential to keep in mind the rules defined by Section 138 of the Negotiable Instrument Act, 1881. According to the Act, a cheque bounce notice is sent to the individual or entity that issued the dishonoured cheque.

          In a corporate scenario, the cheque bounce notice under the Negotiable Instrument Act, 1881, should be addressed to the company. Alternatively, it can be sent to the individuals responsible for the company's management and business operations. The amount for which the dishonoured cheque was issued should be explicitly stated in the cheque bounce legal notice. However, it may also include additional details, such as dishonour fees or legal expenses.

          The primary focus of Section 138 of the Negotiable Instrument Act, 1881, is on the financial deal against a debt. However, the purpose behind issuing the cheque must also be specified. Importantly, the transaction must adhere to the existing legal framework, and the intent behind the cheque's issuance should not contravene any laws.

          Although the law specifies a notice period for cheque bounces, it is advisable to include this detail in the legal notice being served for additional safety.

          It's important to remember, under Section 138 of the Negotiable Instrument Act, 1881, the limitation period for a legal notice begins when the cheque is first presented for encashment. If the cheque was previously presented and the deadline for serving legal notice has expired, the cheque may be presented again for encashment to obtain another cheque bounce memo, provided the cheque's validity allows for this.