Cheque Bounce Notice

A cheque bounce, also known as a dishonored or returned cheque, happens when a bank declines to process a cheque submitted for payment. This usually occurs because the payer's account has insufficient funds to cover the cheque's amount. Nevertheless, other factors, such as incorrect details (e.g., date, signature, or account number) or a damaged cheque, can also lead to a cheque bouncing.

What is a Cheque Bounce Notice?

A cheque bounce notice is a legal notice you receive when a cheque you issued fails to clear, usually due to reasons like not enough money in your account or wrong details. The person who didn’t get the payment sends you this notice, asking you to pay the amount within 15 days. If you don’t pay on time, they can file a legal case against you under the law. So, it’s important to act quickly and settle the matter.

Why Does a Cheque Bounce?

A cheque bounces when the bank doesn't clear it, which means the payment doesn’t go through, and the cheque is sent back to the person who tried to deposit it.
This happens when the issuer's account lacks sufficient funds, the signature doesn't match the one on file, or there are other issues like a damaged or incorrectly dated cheque.
Insufficient Funds: The most common reason is when the account holder doesn't have enough money to cover the amount written on the cheque.
Signature Mismatch: If the signature on the cheque doesn't match the signature on file with the bank, it will be rejected.
Incorrect or Incomplete Information: Errors like a wrong date, payee name, or the amount written in words that do not match the figures can also cause a bounce.
Overwriting or Alterations: Any changes or overwrites on the cheque, unless properly authenticated with the issuer's signature, can lead to rejection.
Stale Cheque: A cheque presented after three months from the date of issue is considered stale and won't be honored.
Other Issues: A damaged cheque, an account closure, or a stop payment instruction from the issuer can also result in a bounced cheque.
Consequences of a Bounced Cheque

Fees: Banks typically charge fees for bounced cheques, both to the issuer and potentially to the payee.
Reputational Damage: Repeated bounced cheques can damage a person's or business's reputation and make it harder to get credit or conduct future transactions.
Legal Action: In some cases, bouncing a cheque can lead to legal consequences, especially if it's due to insufficient funds and the payee chooses to pursue legal action.

The contents of the Cheque Bounce Notice are:

• The name and address of the drawer of the cheque.
• The name and address of the payee.
• Information about the cheque was presented to the bank for payment.
• Details of the cheque number, date, and amount.
• Date of return of the cheque.
• Reason for the cheque bounce.
• Request for the immediate arrangement of the payment of the amount.
• Reference to Section 138 of the Negotiable Instruments Act.

1.    Notice Stage

•     Send a formal demand notice within 30 days of dishonour.
•     Wait for 15 days for payment.

2.    Filing Complaint

•     If no payment, file a criminal complaint in the Magistrate Court within 1 month of notice expiry.

3.    Court Proceedings

•     Court issues summons to the drawer.
•     Both parties present evidence: cheque, bank memo, notice proof.
•     Court may mediate settlement or proceed with trial.

4.    Judgment

•     If guilty, the drawer may face:
•     Imprisonment up to 2 years.
•     Fine up to twice the cheque amount.
•    Payment of cheque amount to the payee.

Legal Consequences

•          Criminal liability under Section 138.
•          Possible imprisonment or heavy fines.
•          Case can affect future legal reputation.

Financial Consequences

•         Pay cheque amount plus legal costs.
•          Bank may report the bounced cheque to credit bureaus, affecting credit rating.

Reputational Consequences

•          May affect relationships with suppliers, banks, and business partners.

These documents are crucial for establishing the facts of the case and proving the drawer's liability.
1. The Dishonored Cheque and Bank Documents

Original Bounced Cheque: The physical cheque is the primary evidence in your case.
Cheque Return Memo / Bank Memo: This vital document from your bank states the reason and date of the dishonor (e.g., "Funds Insufficient," "Signature Mismatch," "Account Closed," "Stop Payment"). This memo acts as concrete proof of the cheque's dishonor.
Bank Statement (Optional but Recommended): A copy of your bank statement showing the debit entry for the cheque presentation and the subsequent credit entry upon its return (if applicable) can further substantiate your claim.
2. Legal Notice and Proof of Dispatch/Delivery

Copy of the Legal Demand Notice: A true copy of the formal written notice you sent to the drawer demanding payment of the bounced cheque amount.
Proof of Service of Notice: This is extremely important to demonstrate that the drawer received the legal notice within the stipulated timeframe. Acceptable proofs include:
Registered Post with Acknowledgment Due (RPAD) Slip: The postal receipt from sending the registered post.
RPAD Acknowledgment Card (AD Card): The card is signed by the recipient upon delivery and is returned to you by the postal department. This is considered very strong proof of delivery.
Courier Receipt and Delivery Confirmation: If sent via courier, the receipt with the tracking number and the delivery confirmation report from the courier company.
Email Confirmation (if sent through an advocate): In some cases, especially if sent via a lawyer's official email, the email confirmation can serve as proof.
3. Complaint and Supporting Affidavits

Criminal Complaint (Drafted by a Lawyer): This is the formal petition filed in the Magistrate's court. It should clearly outline the entire chronology of events, including:
Details of the payee (complainant) and the drawer (accused).
The transaction or underlying debt for which the cheque was issued.
Full details of the cheque (number, date, amount, bank).
Details of the cheque's presentation and dishonor, along with the reason.
Particulars of the legal notice sent, including date of dispatch and receipt.
A statement that the drawer failed to make payment within the 15-day notice period.
A prayer for legal action under Section 138 of the Negotiable Instruments Act.
Affidavit of the Complainant: A sworn statement by the payee affirming the truthfulness of the facts stated in the complaint. This is usually filed along with the complaint.

4. Documents Proving Legally Enforceable Debt/Liability (Crucial)

While Section 138 presumes a legally enforceable debt, it's always beneficial to provide documents that support the existence of such a debt or liability. This strengthens your case and helps counter potential defenses by the drawer. These may include:
Invoices, Bills, or Receipts: If the cheque was issued against goods or services provided.
Loan Agreements / Promissory Notes: If the cheque was issued for a loan repayment.
Supply Orders or Contracts: Documents establishing the business transaction.
Correspondence (Emails, SMS, etc.): Any communication between the parties related to the debt or the cheque.
Account Statements: If it's a long-standing financial relationship, relevant entries show the outstanding amount.
5. Identity and Authorization Documents

Complainant's Identity Proof: A copy of the payee's Aadhar Card, PAN Card, or other government-issued ID.
Vakalatnama (Power of Attorney): If the complaint is being filed by a lawyer on behalf of the payee, a signed Vakalatnama authorizes the lawyer to represent the payee in court.
Board Resolution (for Companies/Organizations): If the complainant is a company or an organization, a board resolution authorizes a specific individual (e.g., director, manager) to file the complaint on behalf of the entity.
6. Court Fees

Court Fee Stamp / Challan: Court fees are payable based on the cheque amount. The specific amount varies by jurisdiction and cheque value, and these fees must be affixed to the complaint or paid as per court rules.

The notice should be sent using methods that provide legal proof:

1.    Registered Post with Acknowledgment Due (RPAD) – Widely accepted by courts.

2.    Speed Post with delivery proof – Provides tracking and acknowledgment.

3.    Courier with receipt – Can also be used as evidence.

4.    Digital communication – Not legally sufficient unless acknowledged by the drawer in writing.

Keep:

•          A copy of the notice.
•          Proof of delivery (acknowledgment receipt, tracking report).