What is Dishonour of cheque?

Answer: When the person to whom the cheque is issued, presents the same to the bank and is returned without being credited into his account. This results in Dishonour of the cheque.

What should you do, if the cheque gets dishonour?

Answer:- When your cheque dishonours, you should go to the bank and look for a return memo.  The bank issues the return memo to the payee with the reason stated for such dishonor of cheque or nonpayment to the holder of the cheque.

What are the reasons for the dishonour of cheque?

There are majorly three reasons for the dishonor of cheque:

  1. Insufficient funds
  2. Payment stopped by drawer
  3. Drawer Account closed

What are the legal steps you should take?

Answer: Once you receive the Returning Memo, you can initiate legal proceedings against the person who issued the cheque. The first step for recovering the said amount is to send a legal demand notice under section 138 of the Negotiable Instrument Act,1881 to the issuer of the cheque.

 What things you should mention in a legal notice?  

Answer: The demand notice should have the following Points:

  1. There should be a contract or agreement between the holder and the drawer at the time of the loan.
  2. The payee had issued a cheque in discharge of his legally recoverable debt.
  3.  The demand notice must contain the details of the cheque and return memo given by the payee bank.
  4. The legal notice should be for the demand for the payment.
  5. There must be 15 days time period in which the issuer of the cheque can make a payment.
  6. This demand notice should be sent within 30 days from the receipt of the return memo.
  7. The issuer of the cheque shall be liable for conviction if the demand is not met within 15 days of the receipt of the notice.

What are the consequences if the issuer of the cheque does not respond to the legal notice?

Answer: When notice is sent through a registered post or courier and is returned unclaimed then it is presumed that the notice is duly served. The court presumes that the issuer of the cheque has knowledge of the complaint filed against him.

What are the ingredients required for filing a complaint under section 138?

Answer: First, the cheque must have been drawn for the discharge of existing debt or liability. Secondly, Cheque must be presented within 6 months or within the validity period whichever is earlier. Thirdly, the cheque must be returned unpaid due to insufficient funds or it exceeds the amount arranged. Fourthly, the drawer of the cheque is informed of dishonor of cheque within 30 days from the date the cheque is dishonored. Lastly, the drawer of a cheque must fail to make payment within 15 days of receipt of the notice.

What are the documents required for filing the complaint?

Answer: For filing a complaint you need, an original cheque, original return memo, purchase order/statement of accounts/ledger Account, original speed post receipt, and delivery reports.

Where the complaint lies under section 138 of N.I Act lies?     

Answer: The complaint under section 138 of the N.I Act is filed before the Judicial Magistrate First Class/Chief Metropolitan Magistrate in written form within one month of the date on which 15 days period (given through legal notice) is expired.

When the causes of action arise?

Answer:  The Cause of action arises when notice is served on the issuer of cheque and he fails to make a payment of the amount of cheque within 15 days from the date of receipt of the notice.

The court is empowered to take cognizance of the offence even if a complaint is filed beyond one month by condoning the delay if sufficient cause is shown.

But remember, once a cause of action has arisen, the limitation will begin to run. And could not be stopped by presenting the dishonored cheque again.

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