If a Check Bounes Will It Asutomatically Be Tried Again

Bounced cheques are ane of the most common offences plaguing the financial world. Co-ordinate to the Supreme Courtroom, there are over 40 lakh such pending cases in the country. A cheque can be dishonoured for various reasons, the most common beingness bereft funds in the account of the person drawing the check, and a mismatch of signatures with the banking company records. Merely what do you do if you lot land a bad cheque? Here's a step-by-step guide to the legal recourse that is available to y'all.

Filing a criminal complaint

When a check bounces the first time, the bank problems a 'cheque return memo', stating the reasons for non-payment. The holder can resubmit the cheque to the bank within three months of the engagement on it, if he believes it will be honoured the second fourth dimension.

The other option would be to prosecute the defaulter legally. The first footstep is to send a legal notice to the defaulter within 30 days of receiving the cheque render memo. All the relevant facts of the instance, including the nature of transaction, amount, date of depositing the instrument in the bank, and subsequent date of dishonouring, should be clearly mentioned in the notice. If the cheque issuer fails to make a fresh payment inside 30 days of receiving the notice, the payee has the right to file a criminal complaint under Section 138 of the Negotiable Instruments Act. However, the complaint should be registered in a magistrate's court within a month of the decease of the notice menses.

If you fail to file the complaint within this menstruation, your suit volition become time-barred and, hence, not exist entertained by the court unless you evidence sufficient and reasonable cause for the delay. On receiving the complaint, forth with an affidavit and relevant paper trail, the court will upshot summons and hear the matter. If found guilty, the defaulter can be punished with a prison house term of two years and/or a fine, which can be as loftier every bit twice the cheque amount.

However, the defaulter can entreatment to the sessions courtroom inside one month of the date of judgement of the lower courtroom. If a prolonged court battle is not adequate to both the parties, an out-of-court settlement can exist attempted at any point. "You tin likewise file a case of cheating under Department 420 of the Indian Penal Code, but the above recourse is preferred as it is faster and specially dedicated to this particular offence (bounced cheques)," says Ravi Goenka, advocate, Goenka Law Assembly.

Filing a civil adjust

While the in a higher place-mentioned process is helpful in taking a defaulter to task, information technology may not e'er upshot in recovery of the awaiting ante. Hence, ane can file a split ceremonious adapt for recovery of the check amount, forth with the cost borne and the lost interest.

This is where a summary suit under Club 37 of the Code of Civil Process (1908) comes in. A summary suit is different from an ordinary arrange as it does non give the defendant the correct to defend himself. Instead, the defendant has to procure permission from the courtroom to exercise and then. Even so, recall that summary suits can be availed of just in recovery matters, be it promissory notes, bills of exchange or cheques. "Since a summary suit is a civil proceeding that does non accept the force of a criminal charge, the chances of imprisonment are remote in such matters," says Goenka.

Exceptions

These legal remedies are available only where pending debt or liability can be clearly established. Hence, if a bounced check was issued as a donation or as a souvenir, the holder cannot legally sue the defaulter.

Risk faced past defaulters

A jail term or heavy penalty isn't the but consequence faced by the issuer of a dishonoured cheque. The depository financial institution has the right to stop the chequebook facility and shut the account for echo offences of bounced cheques. However, the RBI clearly states that such action tin be taken only if the default has taken place at least 4 times on cheques valued at over Rs 1 crore. Says Aakanksha Joshi, senior associate, Economical Laws Practice: "If the bounced cheque was for repayment of loans, banks also have the collateral offered as security. They are jump to effect a observe before they auction such holding to recover the money." Co-ordinate to her, a banking company tin can also deduct coin from the defaulter's account if in that location is an explicit contract giving the bank such a right.

Changes in the pipeline

The option of dragging an offender to court under Department 138 of the Negotiable Instruments Act may not be available for long. If the subpoena proposed past an interministerial group—prepare up last year to wait into policy and legislative changes to tackle the big number of pending cases—are accepted, all cases of dishonoured cheques will accept to be decided only through arbitration, conciliation or settlement past lok adalats. If the affair is referred to an arbitrator, the latter will hear both the parties and pass an award bounden on both. This can but be appealed on grounds that it is invalid or the defendant was not given acceptable time to present the example, or was not given notice about the arbitrator's appointment.

If the thing is referred for conciliation, a third person has to help the parties come to a settlement. Lok adalats role on similar lines. In both these cases, if the disputing parties are unable to settle, the matter tin exist taken to court again. Banks, notwithstanding, are not happy with these developments. "This is a astern stride in terms of recovery mechanism," says Meenakshi A, head, operations, ING Vysya Bank.

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Source: https://economictimes.indiatimes.com/industry/banking/finance/banking/what-if-a-cheque-bounces-heres-a-guide-to-the-legal-recourse-available-to-you/articleshow/20714356.cms

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