Dishonor of Cheque - All you need to know.

Section 138 of the Negotiable Instruments Act, 1881 deals with such cases. 

A cheque is an instrument given by the account holder to a specific person, directing the bank to make payment of a specified amount to the payee(in whose favor cheque is been drawn). However, cases of dishonor of cheque are very prevalent these days. Dishonor of Cheque is a situation in which the bank refuses to pay the amount of cheque to the payee because of a lack of amount in the bank account of the drawer (The person who has a bank account and draws/write a cheque is the Drawer). 

PROCESS 

Metropolitan Magistrate or Judicial Magistrate of the first class. A complaint can only be filed in the following cases when-

·  The cheque shall be presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier.

·  The payee or the holder in the appropriate time limit shall make a demand for the payment of the said amount of money by giving a notice in writing, to the drawer of the cheque within thirty days of the receipt of information by him from the bank regarding the return of the cheque as unpaid; and

·  If the drawer fails to make the payment of the said amount of money to the payee or, as the case may be, to the holder in due course of the cheque, within fifteen days of the receipt of the said notice. Then a complaint can be proceded in the court of law.

·  Such complaint shall be filed within one month from the date when the cause of action arises that is after the passing of 15 days of giving notice as mentioned above.

·  After the passing of 15 days, a complaint can be filed in the court of law.

PUNISHMENT

In civil - Payee may initiate a recovery procedure in the court of law, apart from the criminal proceeding.

In criminal - In the Negotiable Instruments Act, 1881 if any person is deemed to have committed an offense under Section 138 then he/she will be punished with imprisonment for a term that can extend up to 2 years or with fine which can be twice the amount of the cheque or both.

FOR ANY FURTHER ASSISTANCE, REGARDING THE DISHONOR OF CHEQUE, YOU MAY CONTACT US.