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HOW TO ESCAPE A FALSE CHEQUE BOUNCE CASE IN INDIA?


INTRODUCTION

The main purpose behind enacting section 138-142 of the Negotiable Instrument Act, 1881,(NIA,1881) was to ensure efficient banking operations and promote transparency and credibility in transactions taking place via cheques. Section 138 of the NIA, 1881 deals with the commission of cheque bounce cases and makes it a criminal offense punishable with imprisonment or fine or both. However, what is surprising is the growing number of false cheque bounce cases, initiated with malafide intention in order to extort money from someone or to disparage his image. This leads us to the question as to how to escape a false cheque bounce case in India?


WHAT IS CHEQUE BOUNCE?

As per section 6 of the NIA, 1881, a cheque is a bill of exchange drawn on a specified banker and is not payable otherwise when on demand. This definition was amended in 2015 in order to widen its scope by including both, an electronic image of a truncated cheque and an electronic cheque within its ambit.


A cheque maybe bounced or dishonored or rejected due to a number of reasons, the primary one being insufficient funds in the account, because of which the bank is unable to process the same. Some other common reasons for a cheque bounce include both trivial mistakes like the error in account number or name of payee or irregularity in the signature or overwriting and deliberate mistakes like issuing a stale cheque or post-dated cheque or the issuer ordering ‘stop payment' to the bank etc. Section 138 of the NIA, 1881 provides a comprehensive definition of dishonor of cheque along with the punishment and conditions precedent. This includes-

  • The cheque has been, presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier;

  • The holder of the cheque makes a demand for the payment of the said amount by way of a notice to the drawer of the cheque within 30 days from the receipt of the information regarding the dishonor of the cheque; and

  • There is default on part of the drawer to make the payment of the said amount within fifteen days of the receipt of the notice to the drawer.


WHAT PRECAUTIONS SHOULD BE TAKEN AND WHAT ARE THE LEGAL REMEDIES AVAILABLE?

In case of a false cheque bounce people often are unaware as to how to defend such a case and they end up being the victim and facing the legal implications either by paying money in form of fine or being imprisoned or both. Thus it is essential to know the precautions that need to be taken and the legal remedies that could be resorted to in such cases. These include-

  • Keep all the relevant documents ready- it is absolutely imperative to show that the transaction in question took place by a cheque that you had issued, hence, all the documents like copy of the cheque, bank account statement, payment invoice, bank draft cheque, etc. should be collected in order to be shown as evidence of payment in a false cheque bounce case.

  • Immediately get in contact with your bank- as soon as you get the knowledge of cheque dishonor from the cheque bearer, you should immediately get in contact with your bank and inquire about the same, in case the cheque has actually been dishonored then the bank will notify you along with the ground on which it has been bounced.

  • Send a prompt reply to the legal notice- on receiving the legal notice regarding the cheque bounce you should as a matter of priority get in touch with a lawyer who could send a prompt reply to the same. The NIA, 1881 gives a period of 30 days to send the reply to the cheque bounce notice. In the majority of cases on receiving the legal reply, the false cheque bounce case amounting to fraud is usually withdrawn.

  • File a counter case- in case a person files a false cheque bounce case against you, you should hire a lawyer to file a counter case of either civil nature claiming compensation for damages and expenses incurred by you while dealing with the bank fraud case of false cheque bounce or of criminal nature for filing a false case along with defamation charges.

In other words, both civil and criminal remedies are available with the drawer of the cheque in such cases however, he should begin by sending a prompt reply to the legal notice of cheque bounce send to him, thereafter he could proceed by filing a case against the person in the court for either civil or criminal liability.


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