Skip to main content

Cheques Bounce - The legal consequences

Download Tax Saving Mutual Fund Application Forms

Invest In Tax Saving Mutual Funds Online

Buy Gold Mutual Funds

Leave a missed Call on 94 8300 8300

 

Cheques Bounce Implications

A cheque is a negotiable instrument in India and is normally valid for three months from its date. Cheque bouncing is one of the most common offences in the country, with over 40 lakh pending cases in the Supreme Court. A cheque is said to be bounced when the payment stated on it is not made and it is dishonoured.

A cheque can bounce for several reasons, which include insufficiency of funds, mismatch in signature, stale cheques, post dated cheques or if there are corrections in the cheque without authentication. The bank collects a penalty from the defaulter when a cheque bounces.

The important point here is that when a cheque bounces, it is a criminal offence in India. Therefore under the Negotiable Instruments Act, 1881, the person who had issued the bounced cheque is punishable by heavy fine and jail term also.

What is the legal remedy you have if you have been issued a cheque which gets bounced?

Almost every bank gives a ‘cheque return memo’ along with the returned cheque stating the reason for the bounce. If you hold the cheque, you need to inform this to the drawer and ask if you can re-present it to the bank within the 3 months period. If cheque is dishonoured even the second time, then you can take legal action. As a first step, you can send a legal notice to the defaulter within a period of 30 days from receiving the cheque return memo. The notice should contain all necessary facts of the matter, including the details of the first time the cheque was dishonoured. The defaulter needs to make a fresh payment within a period of 15 days from the receipt of this notice. However, if he still doesn’t make the payment within this time period, then you can file a complaint in the magistrate court. This case should be filed within a maximum period of 1 month from the date of expiry of the 15 days time period.

Remember that the complaint should be filed within the time frame specific. If this is not done, then the case will become time barred and will not be entertained. When your case comes for hearing, the defaulter can be punished with a jail term for two years and/or a penalty which can be upto twice the cheque amount. The defaulter can appeal against the order within a period of 1 month of judgement.

Case 1: Bouncing of a rent cheque:

In India, it is common practice for the landlord to take post dated cheques from the tenant. In case a rent cheque bounces, the landlord can follow the above procedure to recover the dues from the tenant. Sometimes, it may so happen that the tenant does not have the funds simply because the landlord did not drop the cheque at the expected time. Therefore, the landlord is bound to first inform the tenant and only then proceed with the legal process. There may be another case when the tenant wishes to set off an amount from a particular month’s rent towards some expense he incurred on behalf of the landlord, which the latter refuses to pay. If there is a cheque bounce because of this, the criminal case will continue against the tenant till he is able to establish that there was a legitimate set off.

Case 2: Bouncing of an EMI payment:

When a cheque meant for an EMI payment on a loan is dishonoured, the bank can also file a case against the defaulter. However, banks do not do this as the first step. Firstly, hefty penalties, loan default charges and cheque bounce charges are levied. These keep building up for every month of default and added to the EMI amount. Also, the defaulter’s credit rating gets affected with every default he makes. In case of secured loans, banks also have the security as collateral. If the borrower does not make payments even after repeated reminders, the bank can give sufficient notice and auction the security to recover the dues.

Case 3: Bouncing of a cheque in a business transaction:

If you receive a cheque from a business debtor and this gets bounced, then you should follow the above procedure to recover dues. In case of bounced cheques in business transactions, the added penalty would be the loss of face in business circles, affecting your reputation and business deals.

Considering the huge number of pending bounced cheque cases in the courts, the Government is mulling to amend the Negotiable Instruments Act which will restrict the payee from taking the defaulted person to court. According to news reports, such a person who has defaulted in making the payment will not face jail term and the cases will be handled only through arbitration and settlement by Lok Adalats. This proposal has come under criticism from the common man, as it is believed that this will only increase cases of payment default. A more stringent and rigorous punishment should be put in place to reduce instances of bounced cheques in the country.

 

 

 

We can help. Call 0 94 8300 8300 (India)

Leave your comment with mail ID and we will answer them

OR

You can write back to us at

PrajnaCapital [at] Gmail [dot] Com

 

---------------------------------------------

Invest Mutual Funds Online

Invest Any Mutual Fund Online

Download Mutual Fund Application Forms from all AMCs

Download Mutual Any Fund Application Forms

---------------------------------------------

 

Best Performing Mutual Funds

    1. Largecap Funds             Invest Online
      1. DSP BlackRock Top 100 Fund
      2. ICICI Prudential Focused Blue Chip Fund
      3. Birla Sun Life Front Line Equity Fund

B. Large and Midcap Funds         Invest Online

      1. ICICI Prudential Dynamic Plan
      2. HDFC Top 200 Fund
      3. UTI Dividend Yield Fund

C. Mid and SmallCap Funds          Invest Online

      1. Reliance Equity Opportunities Fund
      2. DSP BlackRock Small & Midcap Fund
      3. Sundaram Select Midcap
      4. IDFC Premier Equity Fund

D. Small and MicroCap Funds        Invest Online

      1. DSP BlackRock MicroCap Fund

E. Sector Funds          Invest Online

      1. Reliance Banking Fund
      2. Reliance Banking Fund

F. Tax Saver Mutual Funds      Invest Online

1. ICICI Prudential Tax Plan

2. HDFC Taxsaver

      1. DSP BlackRock Tax Saver Fund
      2. Reliance Tax Saver (ELSS) Fund

G. Gold Mutual Funds        Invest Online

      1. Relaince Gold Savings Fund
      2. ICICI Prudential Regular Gold Savings Fund
      3. HDFC Gold Fund

H. International funds         Invest Online

1. Birla Sun Life International Equity Plan A

2. DSP BlackRock US Flexible Equity

3. FT India Feeder Franklin US Opportunities

4. ICICI Prudential US Bluechip Equity

5. Motilal Oswal MOSt Shares NASDAQ-100 ETF

Popular posts from this blog

Birla SunLife Manufacturing Equity Fund

The Make in India program was launched by Prime Minister Naredra Modi in September 2014 as part of a wider set of nation-building initiatives. It was devised to transform India into a global design and manufacturing hub. The primary motive of the campaign is to encourage multinational as well domestic companies to manufacture their products in India. This would create more job opportunities, bring high-quality standards and attract capital along with technological investment to bring more foreign direct investment (FDI) in the country.   Why India as the next manufacturing destination?   The rising demand in India along with the multinational's desire to diversify their production to include low-cost plants in countries other than China, can help India's manufacturing sector to grow and create millions of jobs. In the words of our Honourable Prime Minister- Mr. Narendra Modi, India offers the 3 'Ds' for business to thrive— democracy,...
Read more

Total Returns Index brings out real Equity Funds Performers

From February, equity mutual funds have to change their benchmarks to account for dividend payments. Until now, funds used price-based benchmarks alone. TRI or total return indices assume that dividend payouts are reinvested back into the index. What this does is lift the overall index returns, because dividends get compounded. For example, the Sensex TRI index will consider dividend payouts of its constituent companies while the Nifty50 TRI index will consider dividends of its constituents. Using TRI indices as benchmarks comes on the argument that an equity funds earn dividends on the stocks in its portfolio, which they use to buy more stocks. Therefore, using an index that also considers dividend reinvestment would be a more appropriate benchmark. Shrinking outperformance With a stiffer benchmark, it is obvious that the margin by which an equity fund outperforms the benchmark would shrink. Rolling one-year returns from 2013 onwards, the average margin by which largecap funds out...
Read more

Stock Review: Havells

HAVELLS India's stock performance has been muted in the past three months, in line with the weak broader market. But, given the turnaround in its overseas subsidiary and the launch of new products in its consumer durable business, the company's stock may undergo a re-rating.    Havells is India's leading consumer electrical goods company, with consolidated sales of . 5,527 crore in the past four quarters. Its wholly-owned subsidiary Sylvania, which makes lighting and fixtures, has established brands in European, Latin American and Asian markets. Sylvania repre sented nearly half of the company's consolidated revenues in the first half of FY11.    Sylvania's poor financials hit Havells' consolidated performance in FY10. But, this has changed in the cur rent fiscal. Havells has reduced fixed costs of Sylvania by exiting from unprofitable businesses and outsourcing manufacturing to low-cost locations such as India and China. In the September 2010 quarter, Sylv...
Read more

Kisan Vikas Patra - KVP

  Kisan Vikas Patra (KVP) First launched in 1988, the Kisan Vikas Patra (KVP) is one of the premier and popular saving scheme offering from the Indian Postal Department. This product has had a very chequered history- initially successful, deemed a product that could be misused and thus terminated in 2011, followed by a triumphant return to prominence and popular consumption in 2014. The salient features of KVP are as follows- The grand USP- Money invested by the applicant doubles in 100 months (8 years, 4 months). KVPs are available in the following denominations- Rs.1000, Rs.5000, Rs.10,000 and Rs.50,000. The minimum purchase value for the KVP is Rs.1000. There is no maximum limit. KVPs are available at all departmental post offices across India. These certificates can be prematurely encashed after 2 ½ years from the point of issue. KVPs can be transferred from one individual to another and from one post office to another. ----------------------------------------------------- Inve...
Read more

Mutual Fund Review: Reliance Regular Savings Equity

    Despite high churn, Reliance Regular Savings Equity has managed to fetch good returns   In its short history, this one has made its mark. Though its annual and trailing returns are amazing, the fund started off on a lousy note (last two quarters of 2005). It managed to impress in 2006 and was turning out to be pretty average in 2007, till Omprakash Kuckian took over in November 2007 and wasted no time in changing the complexion of the portfolio. Exposure to Construction shot up to 28 per cent with almost 21 per cent cornered by Pratibha Industries and Madhucon Projects . Exposure to Engineering was yanked up (18.50%) while Financial Services lost its prime slot (dropped to 6.69%) and Auto was dumped. That quarter (December 2007), he delivered 54.66 per cent (category average: 25.70%).   When the market collapsed in 2008, thankfully the fund did not plummet abysmally. But even its high cash allocations could not cushion the fall which hovered around the category average. ...
Read more
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now