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A step by step statutory compliances in a cheque bounce matter to bring an effective action against the delinquent.

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Monday, October 15, 2012

STEPS TO BE FOLLOWED IN A CHEQUE BOUNCE MATTERS


STEPS TO BE FOLLOWED IN A CHEQUE BOUNCE MATTERS – SECTION 138 OF THE NEGOTIABLE INSTRUMENTS ACT

A great hardship is caused to a person if a cheque issued in his favour is dishonoured. To discourage cheque dishonor, the cheque bouncing act is an offence and punishable. The complainant to bring an effective action should ensure satisfactory compliance of the law.

In India the cheque dishonor is governed under the Negotiable Instruments Act, 1881.

Careful reading of the Section 138 of the Negotiable Instruments Act, 1881 provides the steps that are required to be followed with regard to the dishonor of the cheque for insufficiency, etc., of funds in the account.

Below is a simple and a ready note of the steps (compliance) to be followed in a dishonor of the cheque as provided under Section 138 of the Negotiable Instrument Act, 1881:

1. The cheque must have been presented to the Drawee-Bank within 3 months from the date on which it is drawn, or within the period of its validity, whichever is earlier.

2. Within 30 days of receipt of information from the Bank about dishonour of the cheque, the payee should have made a written demand on the drawer for payment of the amount of money represented by the cheque.

3. The Drawer gets 15 days from the receipt of notice to make the payment to avoid liability.

4. A written Complaint should be made to the Metropolitan or a first class judicial magistrate by the payee within 1 month from the date on the expiry of 15 days time given to the drawer to discharge his liability.

5. The Complaint in writing is to be made by the Payee or holder in due course of the cheque. [The Supreme Court in (1998) 1 SCC 687 held that when the Complainant is a body corporate, it is the de jure Complainant and it is necessary to associate a de facto (real person) Complainant to represent the former in Court proceedings and has to be examined as the Complainant.]

6. The Hon’ble Court will take cognizance of the Complaint on the basis of the contents of the complaint and proceeds further to examine the Complainant.

7. The Hon’ble Court will issue Notice/Summons to the accused.

8. The Hon’ble Court will examine the Complainant and the Accused [Either party to lead evidence with original documents to prove their case].

9. The Hon’ble Court on hearing the parties will pass final order/judgment.

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Prepared & Copyright Hemanth S, HEMANTH & ASSOCIATES; for suggestion and information please email legal@hemanthassociates.com