In today’s world, using checks for payments has become a common practice, whether it’s for business transactions, personal payments, or other financial dealings. However, there are times when checks can bounce. A check bounces when the bank refuses to honor it, and there could be several reasons behind it. The most common reason is insufficient funds in the account, but issues such as mismatched signatures or the expiry of the check’s validity can also lead to a bounced check.
Supreme Court’s Directive on Check Bounce
In India, a bounced check is considered a legal offense, and there are penalties associated with it. However, the Supreme Court has clarified that the accused is not immediately sent to jail upon a check bounce. There are several steps and procedures outlined that must be followed before any legal action is taken. According to the Supreme Court’s guidelines, the accused is given an opportunity to present their side, and the legal process unfolds in multiple stages.
Precautions When Issuing a Check
When issuing a check, ensure that your bank account has sufficient funds. Write the correct date and amount on the check and make sure your signature is accurate. These simple precautions can help you avoid check bounce issues. Additionally, it’s advisable to regularly check your bank statements to be aware of your available balance. With mobile banking, you can easily access this information at any time.
First Legal Step After a Check Bounces
If a check bounces, the payee (the person receiving the payment) must send a legal notice to the person who issued the check. This notice must be sent within 30 days of the bounce. The notice will give the issuer 15 days to make the payment. If the issuer settles the payment within this period, the matter ends here, and no further legal action is taken. This is the first opportunity for the issuer to resolve the issue without facing legal consequences.
Filing a Complaint in Court
If the payment is not made within 15 days of receiving the notice, the payee can file a complaint with the magistrate’s court within 45 days of sending the notice. The complaint is filed under Section 138 of the Negotiable Instruments Act, 1881. Along with the complaint, the check, the bounce notice, and the bounce memo from the bank are attached. After reviewing the case, the court issues a summons to the accused. It is important to note that this complaint is not filed at the police station but directly with the court.
Legal Penalty for Check Bounce
Under Section 138 of the Negotiable Instruments Act, a person found guilty of issuing a bounced check can face up to 2 years of imprisonment, a fine of up to twice the check amount, or both. However, in most cases, the sentence typically ranges from six months to a year, depending on the severity of the case. The judge determines the punishment based on the circumstances of the case and the behavior of the accused.
Provision for Interim Compensation
In 2019, an important amendment was made to the Negotiable Instruments Act, introducing a provision for interim compensation. According to this, the accused can be ordered to pay 20% of the check amount as compensation to the payee during the first court appearance. The Supreme Court later modified this provision, stating that interim compensation can be paid during the appeal stage rather than at the first hearing. If the appeal is accepted, the accused can get this amount back.
Bail and Appeal Rights
A bounced check is a bailable offense, meaning the accused can obtain bail to avoid arrest. The accused is not sent to jail before the final verdict. If found guilty and sentenced, the accused can appeal the verdict in the Session Court within 30 days under Section 374(3) of the Indian Penal Code. During the appeal process, the convicted person may seek suspension of the sentence and bail under Section 389(3), depending on the court’s discretion.
Common Causes of Check Bounce
There are several reasons why a check may bounce. The most common reasons include insufficient funds in the account, mismatched signatures, alterations or corrections on the check, expired check validity, missing or incorrect date, or a closed or frozen account. It’s crucial to pay attention to these details when issuing a check to avoid any potential issues. Sometimes, mistakes made unknowingly can also lead to check bounce.
Preventive Measures Against Check Bounce
To avoid a check bounce, take some necessary precautions. First, ensure that your account has enough funds before issuing a check. If you are issuing a post-dated check, make sure your account has sufficient funds by the specified date. Fill in all the details on the check correctly and avoid any alterations. If changes are necessary, sign next to the corrections. Regularly check your account balance and be aware of any changes in bank policies or regulations.
Resolving Check Bounce Disputes
In many cases, check bounce disputes can be resolved through mutual understanding. Both parties can engage in discussions and come up with a new payment plan, saving time, money, and mental stress. If an agreement cannot be reached, options like Lok Adalat or mediation can be explored, offering faster resolution than the traditional court process. However, these alternatives depend on the mutual consent of both parties.
Disclaimer
This article is intended for informational purposes only and should not be construed as legal advice. Check bounce cases can be complex, and each case has its unique circumstances. It is essential to consult with a qualified legal advisor for any legal issues or disputes. Laws and their interpretation may change over time, so it is recommended to refer to official sources for the latest legal information. The author or publisher is not responsible for any loss or damage resulting from reliance on the information provided in this article.
