A Cheque bounce is an offence punishable with a fine which can extend to twice the amount of the cheque or imprisonment for a term not more than 2 years or both.

Consequences

A cheque bounce is an offence under Section 138 of the Negotiable Instruments Act, 1881 (“Act”) punishable with a fine which can extend to twice the amount of the cheque or imprisonment for a term not more than two years or both. When the payee presents a cheque to the bank for payment, and the cheque is returned unpaid by the bank with a memo of insufficient funds, then the cheque is said to have bounced.

A cheque bounce can occur due to several reasons, but if a cheque bounces due to insufficient funds in the drawer’s account, it amounts to an offence under the Act. The bank must reject the cheque presented for payment with a return memo stating the reason as insufficient funds. In such a case, the payee of the cheque can issue a cheque bounce notice to the drawer demanding to pay the cheque amount.

Circumstances of Cheque Bounce

The various situations that result in cheque bounce are as follows:

Remedies Against Cheque Bounce

When the cheque bounces due to overwriting, mismatch of signature, mismatch of the figures and words of the cheque amount or damaged cheque, the payee can ask the drawer to submit another cheque rectifying the mistake. If the drawer does not agree to submit another cheque, then the payee can initiate civil action against the drawer to pay the cheque amount due to him and not for cheque bounce.

Cheque Bounce Notice under Section 138 of the Negotiable Instruments Act

A cheque bounce notice is issued under Section 138 of the Negotiable Instruments Act when a cheque bounces due to insufficient funds in the drawers’ account for making the payment of the cheque amount. If the cheque bounces for any other reason other than insufficient funds, the cheque bounce notice cannot be issued, and the payee can demand resubmission of the cheque.

Recovery of Money :

It is a method in legal system employed to recover the proceeds, Ex: Civil recovery to recover the value of the property.

Civil remedy

A Suit for recovery of money is a civil remedy and acts as an effective tool to recover money from the defaulter. The suit can be established under Order IV of the Code of Civil Procedure 1908 (CPC). It is generally like a summary suit (Order 37, Code of Civil Procedure) which offers expeditious disposal of the suit as here the defendant is not entitled to defend as a matter of right but only after applying for leave of the court, he can defend.

Jurisdiction

According to Order IV of the Code of Civil Procedure 1908 (CPC), a suit can be filed at any place where the Defendant resides; or any place where the defendant carries on business or personally works for gain; or the cause of action wholly or partly arises.
Pecuniary jurisdiction is determined after considering the territorial jurisdiction. Based on the pecuniary value of the suit, it is decided whether the suit will be filed either in the district court or in the high court.

Competent parties

Companies, partnership firms, proprietorship firms, and traders, etc., are competent to file a suit for recovery of their unpaid bills or Business outstanding amount or payment where there is any written contract/agreement between the parties.

Limitation period

not be taken into consideration. If the suit is instituted after the expiry of the limitation period, the grounds for claiming the exemption must be stated.

Documents required

Any document verifying the grant of money from a person to the defaulter is enough to prove the debt. To file a suit to recover a debt or request a liquidator of the funds paid to the defendant, with or without interest, arising from a written contract, or In the case of enactment, if the amount to be recovered is a fixed amount of money or like the debt other than the penalty, or on a guarantee, if the claim against the Director relates only to a debt or a liquidator’s request.

If the contract or agreement is not in writing, a simple civil action will be filed based on the truths and circumstances of the cases.

Bank account transactions, promissory notes, a contract or other payments so made serve as legal evidence of the lending of such money. Also, Any document, contract, message, telephonic conversation, mail, or post can serve as proper evidence in the Court of law to prove your debt.

Institution of suits under order IV of CPC

Every suit is instituted by way of a plaint. A plaint is the description of facts of the case and the exact amount being claimed along with interest if any. In every such plaint, the facts are to be proved by an affidavit.

A suit is instituted when the plaint is presented, and not when the suit is registered.

A plaint must contain the following particulars:

• Name of the court
• Name, description, and place of residence of the plaintiff
• Name, description, and place of residence of the defendant
• Facts constituting the cause of action, when it arose
• Facts showing that the court has jurisdiction
• The relief the plaintiff claims; the plaintiff’s costs (Prayer clause)
• Any set-off or relinquishment of his claim by the plaintiff
• Value of the subject matter of the suit for the purposes of jurisdiction and court fees
• Signature and verification

Recovery of money is a specific case, and in such cases, the exact or approximate amount claimed must be mentioned in the suit.

Proceedings after institution

Once the suit is registered and summon is issued, the defendant has 10 days to make an appearance, failing which the court assumes the plaintiff’s allegations to be true and, accordingly, awards the plaintiff.

Court fees

As per the schedule, the court fee is required to be paid by the Plaintiff. A suit shall not be accepted in case the same is not filed along with the court fee.

Execution of a Decree

The next step when a person obtains a decree from a court of law against another person, he is to get the decree satisfied. Execution proceedings are the processes by which a person moves to the court for the satisfaction of the decree. Execution is the enforcement of an order or giving effect to the judgment of the court. The execution comes to an end when the judgment-creditor or decree-holder gets cash or other thing granted to him by judgment, decree, or order.