Cheque Dishonor is very common now a days. Data shows that more that in over 80% dishonor incidents, the value of the instrument/cheque have been found to be below Rs.1 lac.
In India Cheque Bounce is a Criminal offence. The offender if proved guilty may be liable to pay twice the amount of cheque or imprisonment up to 2 years or both.
Despite such law, the number of cheque bounce cases in courts are going up every year.
Small Businessess are impacted the most.
Credit Transactions are an integral part of business. Goods are sold on credit in faith that the post dated cheques would be honored on time. While some are honored the rest never get cleared.
The trader rarely gets the balance due or his goods back.
By then he almost forgets about profit rather tries every way out to minimize his losses.
Finally, when he decides to take the legal course he learns that the cost involved in taking legal action surpass the amount mentioned on the dishonoured cheque.
Generally for cheque dishonor cases, it takes 12 to 18 months for the court to come out with a verdict.
Most people fall prey to the tactics adopted by unscrupulous drawers of dishonored cheque.
This hampers the ease of doing business and hurts the sentiments of the trading community.
Government has proposed introduction of section 143A and section 148 to combat the rising cases of cheque dishonor.
The Central Government has been receiving several representations from the public including trading community relating to pendency of cheque dishonour cases.
It is important that people have faith and trust on issuing and receiving cheques.
Section 143 & 148 aim at
- Reduce the number of cheque dishonor cases and
- Provide for payment of Interim compensation to the complainants.
Before discussing Section 143 & Section 148, it is important to understand how cheque bounce cases are being dealt at present-
A chqeque can be dishonoured for a number of reasons.
It is also true that one cannot file a case against the drawer in each and every case of cheque dishonor.
(We will discuss about those cases in the next blog post)
Where a cheque is dishonored, the payee’s banker gives the dishonored cheque and the memo to the payee. The payee can resubmit the cheque within 3 months of the date of the cheque if he believes that, it will be honored .
Usually when a cheque is dishonored, the payee inquires his bank of the reason for dishonor of cheque and informs the drawer of the cheque of such incident, after which they mutually agree for payment on a later date, where the cheque is deposited and cleared. However not all cases end that well.
Generally when a cheque is returned by the bank over and again, the payee must send the drawer of cheque a written notice within 30 days from the date on which the cheque is dishonored.
In case 30 days have elapsed, the case will not stand in the court of law.
In the demand notice the payee should ask the drawer to pay the amount due within 15 days failing which Civil suit u/s 138 of the Negotiable Instrument Act, 1881 Shall be filed.
The payee should send the notice by registered post and should not make the mistake of returning the dishonored cheque to the defaulter.
If the party does not make the payment within 15 days from the date of receipt of notice, the payee should proceed to file a complaint in the court of Judicial Magistrate within 30 days from the date of expiry as prescribed in the notice.
In most cases the payee files a simple civil suit u/s 138 of the Negotiable Instrument Act,1881, which is option time taking. An accompanying application under order XXXIX shall be made as well. Here the court shall be under an obligation to dispose off the case within a certain time frame.
In the next posts I would be sharing more on- Documents that need to submitted in court, court fee and the newly proposed section 143 A & 148.
Thanks for reading. Keep looking this space for more.