PROCEDURE FOR A CHEQUE DISHONOUR:
Original Documents Required
• Dishonoured Cheque
• Dishonour Memo
• Legal Notice issued by the Payee
• Postal receipt and Acknowledgement
• Reply notice issued by the Drawer, if any
• Any document/s which acts as a proof to show that the money is legally recoverable from the drawer of the cheque
Process
• Section 138 of the Negotiable Instruments Act, 1881 (NI Act), deals with the offence pertaining to dishonour of Cheque for insufficiency of funds etc. in the drawers account.
• A cheque must be deposited in the Bank within its period of validity, i.e. 90 days. In case of insufficiency of funds or specific instructions, the cheque may be returned by the Bank with the endorsement, “insufficiency of funds” or “stop payment”. However, the payee/holder can redeposit the cheque (any number of times) within the said period of 90 days from the date on the cheque, if he/she believes that it will be honoured the second time. If the cheque is dishonoured once again, the cheque will be returned again along with the dishonour Memo. It is important to note that the cheque must have been issued by the Drawer to discharge his debt or other liability.
• Prerequisite for filing a Cheque Dishonour Case – Issuance of Notice
• The payee/holder of the cheque has to send a notice by Registered post/Speed Post/Courier/Email to the drawer/defaulter within 30 days from the date of receiving the “Cheque return Memo” from the Bank. If the said notice is not properly issued/served to the drawer/defaulter of the cheque or if there is no intimation of delivery, the Complaint will not be taken up or registered in the Court.
• A statutory period of 15 days from the date of receiving the said notice has to be given to the drawer/defaulter to repay the cheque amount.
• If the drawer/defaulter does not repay the amount, a complaint under Section 138 of the Negotiable Instrument Act, 1881 should be filed within 30 days from the date on which the statutory period of 15 days to repay expires.
Who can file a Complaint?
• The payee/holder of a dishonoured cheque can file a complaint.
When should the Complaint be filed?
• The Complaint is to be filed within 30 days from the date on which the statutory period of 15 days to repay expires.
Against whom can a Complaint be filed?
• The Complaint is filed by the payee/holder of the dishonoured cheque against the drawer of the cheque.
Where should the Complaint be filed?
• The Complaint under Section 138 of the NI Act should be filed in the jurisdictional Magistrate Court within whose territorial jurisdiction the Bank/branch in which the payee/holder hold an account is located.
Procedure/steps followed in Court
• Complaint – to be filed under Section 138 of the NI Act before the Magistrate Court wherein the Payee/Complainant should be present in Court at the time of filing such a complaint.
• Sworn Statement – This is an Affidavit which will be filed by the Complainant before Court
• Summons – Issued to the Drawer/Defaulter through Court.
• Bail – Once the Accused receives the summons, he/she will have to appear in Court on the date mentioned in the summons along with his/her Advocate who shall file Vakalatnama and bail application. Please note that, when the Accused applies for bail, he/she will either have to give a personal bond for an amount which will be decided by the Court as Surety amount or he/she will have to be accompanied by any of his/her family or friend who will act as a Surety. In such a case, Surety application will be filed along with the bail application along with income certificate/land records (of the surety) and the person who is providing Surety will have to be present in Court along with the Accused. Since this offence is a bailable offence, the Court will immediately grant bail, provided the procedure has been carried out correctly.
• Plea – The judge will ask the Accused if he/she accepts the offence of having dishonoured the cheque. If the Accused accepts the offence, he/she will have to plead guilty. If he/she doesn’t, then he can plead not guilty and choose to raise a defence.
• Evidence by the Complainant – the Complainant will provide his/her evidence either orally or by way of an Affidavit and mark documents supporting the case.
• Cross Examination of the Complainant – the Advocate representing the Accused will cross examine the Complainant
• 313 Statement – The Judge will ask a couple of questions to the Accused and record his/her statement and will also ask him if he wants to lead any evidence.
• Evidence by the Accused, if any – The Accused may provide his/her evidence either orally or by way of an Affidavit and mark documents supporting his/her case, if any.
• Cross Examination of the Accused – the Advocate representing the Complainant will cross examine the Accused.
• Arguments to be addressed by the Complainant Advocate
• Arguments to be addressed by the Accused Advocate and the Complainant Advocate will be given a chance to reply.
• Judgment
Punishment & Penalty
If the offence is committed, the drawer/defaulter/Accused will be punished with imprisonment for a term which may extend to two (2) years, or with fine which may extend to twice the cheque amount or both.
Notes:
In case the notice is not issued within 30 days from the date of dishonour, the Payee/holder of the cheque loses the limitation period which in turn disables him/her from filing a cheque Dishonour case.
In case the person is disabled to file a cheque dishonour case due to the above mentioned reason, the person does stand a chance to file a civil suit for money recovery. However, the limitation for filing a civil suit for money recovery is 3 years.
If the Accused fails to appear in Court on the date mentioned in the summons after having received the summons, then the Court will issue a warrant against the Accused. However, the Accused, with the help of his Advocate may file an advancement application in Court and get his bail.
It is important for the Accused to appear in Court on every date of hearing. However, if there is any inconvenience, then an Exemption Application can be filed by the Accused Advocate. However, the discretion lies with the Court to grant exemption.
Prateek Arora 