According to
statistics of Supreme Court; there are over 40 lakh pending cases of cheque
bounce in the country. Lack of adequate knowledge has brought most of them on
the verge of losing money. Here are some of the remedies a person can opt for
while dealing with issues pertaining to return of cheque.
Penalties
for dishonor of cheques due to insufficiency of funds:
Section 138 of the
Negotiable Instruments Act has provided for penalties in case a cheque gets
dishonored for insufficiency of funds. When a cheque is drawn by any person
from his account for payment to another person, it can get bounced due to the
following reasons -
1. Insufficiency of funds.
2. The cheque amount is exceeding the agreed amount arranged to be paid from that account.
In the above mentioned
cases, the person drawing the cheque is deemed to be the committer of offence
and is liable to be punished under the act for a period of imprisonment that
can extend up to two years. The person whose cheque gets dishonored is also
liable to pay a fine which can be up to twice the amount of cheque.
However, in order to drag
the drawer of the cheque for penalty it must be understood that following conditions
need to be fulfilled -
1. Cheque should be presented to the bank within a period of three
months (earlier it was 6 months) from the date mentioned.
2. In case the cheque gets bounced, the holder of the cheque should
ask for the payment by giving a legal notice to the drawer in writing within 30
days of the receipt of information of nonpayment by the bank.
3. Even after receipt of notice if the drawer of the cheque fails
to make the payment within the stipulated time, which is 15 days from the receipt
of notice.
How
to Recover the Money?
The notice sent to the
drawer should be legal as explained earlier and the same should mention that
the cheque was dishonored and payment needs to be made. This notice should be
sent by registered post. Even after 15 days of receipt of the notice, if the
person fails to clear his dues, the payee has a right to file a criminal
complaint under Section 138 of the Negotiable Instrument Act. The complaint
should be registered within one month of the expiry of the notice period.
Exemptions:
A cheque that was drawn
in the name of the charitable trust as a donation or as an application amount
of shares does not come under the purview of dishonor. There might also be
other reasons for dishonor of cheque such as alterations or corrections in the
cheque or difference in signature. In such cases, it is not termed as an
offence. Banks might impose a penalty, though. It should always be
remembered that cheque should be a liability and legal enforceability on the
person who has issued it. One should always follow procedures like legal
notification and demand of funds from the drawer. Most of the pending cases in
courts are because of lack of legal procedure followed. A simple understanding
of these rules can save you from cheque dishonor cases that happen in day to
day life.
CA SHIVA SHANKARA R. SHETTY
CHARTERED ACCOUNTANT
Mobile: +91 9035846043 Email: ca.srshetty@icai.org
www.casrshetty228359.in
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