Cheque Bounce Notice
A Cheque Bounce Notice is a formal communication sent to the drawer (the person who issued the cheque) when their cheque is dishonored by the bank due to insufficient funds, a closed account, or any other reason. This notice serves as a legal reminder to the drawer to pay the due amount and avoid further legal action. Under the Negotiable Instruments Act, 1881, the drawer is legally bound to make the payment once the cheque bounces. Failure to do so may result in criminal charges, including a potential jail term.
Reasons for Cheque Bouncing
- Insufficient Funds: The account does not have enough balance to honor the cheque.
- Account Closed: The drawer’s account has been closed before the cheque could be processed.
- Signature Mismatch: The signature on the cheque does not match the one recorded by the bank.
- Post-Dated Cheque: The cheque is presented before its stated date.
- Stale Cheque: The cheque has expired, usually after six months from the date of issuance.
- Incorrect Details: Errors in the cheque, such as incorrect date, amount, or account number
Steps to Issue a Cheque Bounce Notice
Cheque Return Memo:
- First, ensure that the bank provides a return memo or a dishonor notice detailing why the cheque was bounced.
Draft the Cheque Bounce Notice:
- Prepare the notice clearly outlining the cheque details (cheque number, date, amount) and the reason for bouncing.
- Mention the legal consequence and a request for the payment to be made within 15 days (or the time as specified by law).
Send the Notice:
- The notice must be sent to the drawer via registered post or any other method that ensures proof of delivery. It is advisable to send the notice within 30 days of receiving the bank’s dishonor notice.
Wait for Response:
- The drawer is legally required to respond within 15 days of receiving the notice. If the payment is made within this time frame, the issue may be resolved.
Legal Action:
- If the payment is not made within the stipulated time, the holder of the cheque can file a case under Section 138 of the Negotiable Instruments Act in the court of law.
Contents of a Cheque Bounce Notice
- Sender’s Information: Name, address, and contact details of the payee (person who received the cheque).
- Drawer’s Information: Name and address of the person who issued the cheque.
- Cheque Details:
- Cheque number
- Date of issuance
- Amount mentioned in the cheque
- Reason for Bounce: Clearly state the reason(s) for the dishonor (e.g., insufficient funds).
- Demand for Payment: A formal demand for payment of the amount mentioned in the cheque.
- Timeframe: Specify the period (usually 15 days) within which the payment must be made.
- Legal Consequence: A statement about the legal action that will follow if payment is not made within the time limit.
- Signature: Sign the notice to authenticate it.
Benefits of Sending a Cheque Bounce Notice
Legal Reminder
Serves as a formal reminder to the drawer to settle the amount.
Avoids Litigation
Many times, the drawer will pay upon receiving the notice, avoiding the need for legal proceedings.
Strengthens Case for Legal Action
If the issue goes to court, a notice serves as evidence that the payee attempted to resolve the matter amicably.
Consumer Protection
Protects the rights of the payee, ensuring payment is made for the goods or services provided.
Documents Required for Sending a Cheque Bounce Notice
- Cheque Copy: A copy of the bounced cheque.
- Bank’s Dishonor Memo: Document stating the reason for the cheque’s dishonor.
- Transaction Details: Details of the transaction that the cheque was meant to cover.
- Correspondence: Any communication with the drawer regarding the cheque payment.
Deliverables of Cheque Bounce Notice Process
- Notice Acknowledgment: Proof of the notice sent to the drawer (via registered post, courier, or any other method with acknowledgment).
- Payment Receipt: If the drawer settles the payment, a receipt for the payment made.
- Legal Case Documents: If legal action is pursued, the documents related to the filing of the case, such as the complaint and evidence of dishonor, will be included in the process
Frequently asked Questions
You must send the notice within 30 days of receiving the dishonor memo from the bank.
- The payee can initiate legal action under Section 138 of the Negotiable Instruments Act.
Yes, after the 15-day period from the notice, you can file a complaint in the court.
No, it is the drawer's responsibility to ensure there are sufficient funds in the account.
Sending it through a method with acknowledgment of receipt is advisable to have proof of delivery
Penalties may vary based on the jurisdiction and agreement terms between the parties. The law may also impose a fine or imprisonment.
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