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Procedure-To-File-A-Lawsuit-For-Cheque-Bounce-US-138-Of-NI-Act

7 mons ago

Procedure To File A Lawsuit For Cheque Bounce U/S 138 Of NI Act.

Author: EA Digest
Category : Banking law

A cheque is often regarded as one of the most trusted ways of payments. Even after the whole digitization movement and the internet banking wave, the cheque payments are widely used across the country for several transactions. Cheque bounce on your account not only makes you liable for a fine but it can even send you to jail. Read on to know everything about cheque bounce and the procedure to file a complaint.

Section 138 of the Negotiable Instruments Act, 1881

The Negotiable Instruments Act, 1881 in its Section 138 states that any person who is guilty of cheque bounce from his account owing to insufficient funds is guilty of a criminal offence. Such a person is punishable by a jail term extending up to two years which may or may not be combined with a fine double the amount of the cheque.

Documents required

If you wish to file a criminal case following are the documents that are necessary to be submitted along with the complaint:-

  1. The dishonoured cheque in original.
  2. The memo issued by the bank stating the reason of cheque bounce in original.
  3. Copy of the written legal notice which was issued to the drawer by the payee (payee is the person who receives the cheque).
  4. The post office acknowledgement of the sent notice.
  5. The reply to the notice issued by the drawer.
  6. Any bill/invoice or documents that will act as a proof showing that the money is recoverable from the drawer of the cheque.

Prerequisites

There are certain stipulations to this section which are:-

  1. The cheque was presented to the bank within 6 months from the date on which it is drawn or within the period of its validity.
  2. The holder of the cheque presented the notice of the returned cheque in writing to the drawer within 30 days of the instance.
  3. The drawer after receiving the notice failed to make the payment within 15 days.
  4. The payee then can file a criminal case within 30 days of expiring the 15 days payment notice.

Procedure

The holder of the cheque can file a complaint against the drawer and the procedure is as follows:-

The payee with all the original documents files a complaint before the Magistrate court.

The payee also submits the sworn affidavit stating the facts.

On receiving the complaint along with requisite documents, the court will issue summon to the drawer to hear the matter.

After the evidence verification, cross-examinations and arguments of the advocates of both the parties, the court pronounces the judgment.

Latest update on Section 138 of NI Act

It is important to note that if a case under Section 138/141 of the Negotiable Instruments Act, 1881, is pending, it amounts to admission of debt and not an existence of dispute. The same was held in the case of Sudhi Sachdev v. APPL Industries Ltd.  (catch the whole story along with the judgment) by the National Company Law Appellate Tribunal (NCLAT).

Punishment under Section 138 of NI Act

A person found guilty under Section 138 of the Negotiable Instruments Act, 1881, is punishable with a jail term which may extend up to two years. The court may direct the drawer to pay the amount double of the original cheque amount and can even demand to pay interest on the cheque.

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