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Cheque Dishonor


Overview

A cheque bounces or is considered to be dishonoured when it is presented for payment , but due to reasons such as  insufficient balance in the account, overwriting, expired validity of the cheque among various others, the payment  is rejected by drawee bank and cheque cannot be cleared. Cheque bounce cases are very common in India with close to 30 lakh cheque bounce cases pending as per the latest reports.

Some reasons why a cheque is rejected are:

  1. Due to insufficient balance in the account
  2. Expired validity of the cheque
  3. There is overwriting in the cheque
  4. The cheque is damaged
  5. There is signature mismatch
  6. Mismatch of amount in number or words

 

Remedies for cheque bouncing cases

The following remedies are available in case of cheque bouncing:

  1. Notice of recovery

In the event that the cheque bounces for the second time, the payee has the option of sending a recovery notice to the payer. The recovery notice demands that the issuer of cheque transfer the funds due within 15 days, failing which the recipient would file a complaint under Section 138 of the Negotiable Instruments Act. The recovery notice has to be sent within 30 days of receiving the bounced cheque from the bank. 

  1. Filing of complaint

In the event that the cheque issuer ignores the recovery notice, the payer has the option of filing a complaint under section 138 of Negotiable Instrument Act, 1881 within 30 days before the Judicial Magistrate. Upon being found guilty, the cheque issuer would be fined or sentenced to imprisonment by the Magistrate. If the issuer instructs in writing then the cheque can be issued again.

  1. Civil complaint

Besides a complaint under Negotiable Instrument Act, the aggrieved party can also file a summary suit under Code of Civil Procedure,1908 for recovery of money.

 

 

 

Benefits of taking action in cheque bouncing cases

The benefits of taking action in cheque bouncing cases are:

  1. There is high likelihood of recovering the disputed amount.
  2. It results in quick recovery of money.
  3. It is likely that the defendant would be punished by the court.
  4. The process of recovery of money is not very expensive.

Procedure

Procedure for Cheque Dishonor

Frequently Asked Questions

What is cheque dishonor?

A cheque bounces or is considered to be dishonored when it is presented for payment, but due to reasons such as insufficient balance in the account, overwriting, expired validity of the cheque among various others, the payment is rejected by drawee bank and cheque cannot be cleared.

Is there any deadline for sending recovery notice to the cheque issuer?

Yes, the recovery notice has to be sent within 30 days of receiving the bounced cheque.

Is there any deadline for filing a suit under the Negotiable Instrument Act, 1881?

Yes, the suit has to be filed within 30 days of sending recovery notice to the cheque issuer.

How long does Sabkuch Legal take to draft a cheque recovery notice?

We try our best to complete your task in 2 business days.

Why Choose Us

Why Choose us for Cheque dishonor

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