According to Section 138 of the Negotiable Instruments Act of 1881 (“Act”), bouncing a check is an offence that is punished by a fine up to double the value of the check, up to two years in jail, or by both. A check is said to have bounced when the payee delivers it to the bank for payment and the bank returns it unpaid with a notation indicating insufficient funds.
A cheque might bounce for a number of reasons, but it is an act of fraud under the Act if it does so because there are not enough money in the account of the drawer. The bank must provide a return memo explaining why it rejected the cheque offered for payment due to insufficient funds. When this occurs, the payee of the check may send a notice of cheque bounce legal notice to the drawer requesting payment of the cheque amount.
New Cheque Bounce Rule
Customers who use checks frequently or who merely intend to use checks would need to maintain a minimum bank balance, according a notification sent by the Reserve Bank of India (RBI) in early August 2021. The check will bounce if this minimum balance is not kept. Additionally, the person who wrote the check may be responsible for paying a penalty charge. The National Automated Clearing House (NACH), which was also modified, was made active 24/7 by the RBI.
All national and private banks must comply with these reforms. The rule modification was implemented to speed up and generally improve check clearance. Due to the new rule’s guarantee that NACH would be available every day of the week, the organisation will also be able to process and clear checks on Sundays.
Issuance of Cheque Bounce Notice
The first step when a check fails owing to inadequate funds is to demand payment by sending a written notification of the cheque bounce in accordance with the Negotiable Instruments Act. Within 30 days after receiving notification from the bank and the bounced check, the payee may send a notice saying that the bank is unable to pay the amount on the check because there is not enough money.
The payee must allow the drawer a 15-day grace period after sending the notice that the check was returned unpaid in order for the drawer to make payment. The payee may file a lawsuit against the drawer within 30 days following the expiration of the 15-day grace period if the drawer still does not repay the cheque’s amount.
How to Respond to a Cheque Bounce Case
In order to stop future legal action, the first step is to respond to the legal notice with your defence or pay the required amount by check. However, you must first speak with a lawyer who specialises in check bounces before responding. The issue will be settled right away if the check amount is paid in the beginning.
Although there is no set structure for the response to the legal notice, be sure you include the following topics:
- Send the legal notice’s response to the drawee’s attorney.
- Your name, address, and a brief description.
- Information about the issue, such as the memo explaining a returned check.
- Response to the criticisms levelled at you.
- Refrain from acknowledging any of the accusations made against you in the notification.
- Any grievances against the check’s drawee.
- A statement of your defence in response to the claims made in the legal notice for a bounced check.
- Any response to a legal notification needs to be written on legal letterhead.
- The drawee may lawfully submit a complaint at the court, which would start the legal procedures against you, if you do not respond to the legal notification or pay the cheque amount within 15 days.