Cheque is a negotiable instrument and it is a type of bill of exchange. Negotiable instrument: It is a promissory note, bill of exchange or cheque. Sec. 5 of the Negotiable Instrument Act defines a Bill of Exchange. Bill of Exchange is an instrument in writing containing an unconditional order, signed by the maker, directing a certain person to pay a certain sum of money only to, or to the order of, a certain person or to the bearer of the instrument.

What is a cheque?

A cheque is the means by which a person who has fund in the hand of a bank withdraws the same or some part of it. A cheque is a kind of bill of exchange having following features-

1. It is always drawn on a specified banker and
2. It is always payable on demand without any days of grace

A Cheque in Electronic Form

It reflects the exact mirror image of a paper cheque. It is generated, written and signed through digital means

Truncated Cheque

It is a form of a cheque which is truncated during the course of a clearing cycle, either by the clearing house or by the bank.

Cheque is a written instrument containing an unconditional order addressed to a banker signed by the person who has deposited money to the banker requiring him to pay on demand a certain sum of money to the bearer of the instrument

Sec. 6 of the Negotiable Instruments Act, 1881

Cheque is ‘A bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand and it includes the electronic image of a truncated cheque and a cheque in electronic form’

Parties to cheque

• Drawer– He is the maker of the cheque, the account holder who draws the cheque for drawing money from his bank account, he signs the cheque
• Drawee– It is the bank. The party to whom the drawer gives order to pay the amount to the person named on the cheque or his order to the bearer
• Payee– Party who presents the cheque for payment. He is the person who receives money from bank. He is the person whose name is mentioned on the cheque

 

‘Dishonour: Meaning’: Black’s Law Dictionary

“Dishonour” as to refuse to accept or pay a draft or to pay a promissory note when duly presented

Dishonour of cheque

• A cheque is written by a drawer
• A cheque is said to be dishonour when the payment is not made on its presentation to the bank
• There may be many reasons of dishonour of cheque- Insufficient funds in the account, mismatch of signatures etc.
• Issue of dishonour of cheque is dealt under Sec.(s) 138 to 147 of the Negotiable Instrument Act, it provides remedies and various forms of punishment

1. Venkatasubbaya vs. P.R. Rao Tobacco Co. AIR 1972 (AP) 72, Cheque is dishonoured by non-payment when the maker of the note, acceptor of the Bill or drawee of the cheque makes default in payment.

Ingredients to constitute criminal offense

• Cheque should have been issued for the discharge, in whole, or in part, of any debt or other liability
• Cheque may be presented any number of times
• Payee should have issued notice in writing to the drawer within 30 days of the receipt of information by him from the bank regarding the return of the cheque as unpaid
• Cheque should have been presented within the period of 3 months or within the period of its validity, whichever is earlier
• Non-payment of the amount due on the dishonoured cheque within 15 days of the receipt of the Notice by the drawer
• Complainant can file a case, within one month
• Complaint is to be filed before Judicial Magistrate First Class
• Payment made within notice period, no offence is committed

Cheque bounce defense

1. Absence of a legally-enforceable debt or liability
2. The cheque was not returned for the reasons constituting an offence
3. Complaint filed beyond limitation as provided under Sec.(s) 138 and 142
4. Absence of legal notice of 15 days
5. Lack of Jurisdiction
6. No return of cheque to the payee

Keep proof of the necessary legal documents showing had sufficient balance in account that shows that the cheque bounce could not have possibly happened.

Appoint an advocate who will help with filing the legal notice of the Bank because it is a very tedious and painful process.

You can also initiate a counter case against the person who has charged you for the false cheque bounce. You can also get compensation under the civil law for false accusation.

For any false cheque bounce case it is must that you stay in touch with the bank and retrieve all the information regarding the dishonour of the cheque. The bank is mandated to notify the sender if there occur any issues regarding the cheque bounce case and the victim can ask the bank regarding further details.