A bounced cheque that’s been presented to us is not an uncommon occurrence.
But often, it is carelessness in maintaining sufficient balance in the account or not keeping track of cheques drawn that leads to this situation. So if the person writing the cheque is known to you, it would be best to bring it to his/her notice and ask for another cheque. But what if the cheque writer does not intend repaying your due? The Negotiable Instruments Act provides for stringent punishment. So when a cheque bounces, send a demand notice to the party that wrote the cheque, threatening to initiate proceedings under the Negotiable Instruments Act if the amount is not paid.
Legal threats The threat of prosecution alone is often enough to get results. If the drawer is an individual, the proceedings take place under Section 138 of the NI Act. If the drawer is a company, its managing director can be personally prosecuted under Section 141.
There’s a 30-day time limit to send this notice from the date the cheque has bounced. The period provided to the cheque drawer to respond to the notice by making payment is 15 days.
The notice should contain evidence that you presented the cheque within its period of validity, a statement of the debt owed and information about why the cheque was dishonoured. Clearly, inform the drawer that if he does not make payment within 15 days, you will initiate legal action. But in case a cheque was given as a gift, donation or other reasons that are not legally enforceable, the provisions of the NI Act can’t help.
Filing a complaint If the cheque issuer doesn’t respond within the 15-day period, you then have 30 days to file a complaint with a magistrate. The complaint must be made by a person capable of making a physical appearance in court.
Note that even if the drawer issues you a fresh cheque after being served a demand notice and it is again dishonoured, this doesn’t mean that the time limit for filing a complaint with a magistrate has been extended.
If the defaulter is found guilty, he can be punished with a prison term of two years and/or a fine that can go up to twice the cheque amount. However, he has the option to appeal to a sessions court within one month of the date of judgment by a lower court.
An out-of-court settlement can be attempted at any point.