You may have an excellent financial record and may be well organised in maintaining the books; however, all that would mean nothing if you have unintentionally and inadvertently given a cheque that bounced. The mere action can plummet your CIBIL score or worse, get arrested.
Although it’s one of the most common financial offences in India, under Section 138 of the Negotiable Instruments Act, 1881, it’s a cognizable offence. In other words, if charged, it’s punishable with an imprisonment for a term which may be extended to two years, or with fine which may extend to twice the amount of the cheque, or with both. The aggrieved party can file a civil or criminal complaint against you, the issuer of the cheque.
A cheque is said to be dishonoured or bounced when it is presented to a bank but the amount is not paid because of either insufficient funds in the issuer’s account or mismatched signature or some other reason.
Considered an offence, a non bailable warrant can be immediately issued against you under Section 417 and Section 420 of the Indian Penal Code. In case there is more than one cheque that has bounced, the payee can file separate suits against each dishonoured cheque, which can compound issues for the defaulter i.e. you. In each case, the intention of cheating has to be proven.
Of course, it also depends upon the amount in the bounced cheque, meaning what you owe the person, to whom you issued the cheque.
If you’re lucky, where the defaulter understands it’s a genuine mistake or an oversight on your part, you can get away by paying a small fine to the bank for the bounced cheque.
In the scenario that you have been sued and the case is being heard in the court and you have to travel abroad for some reason, then you can do so. However, this is only possible if the court has not passed an order passed directing you to not leave India. You will continue to remain amenable to the Indian courts, so can only take short trips and not relocate till the case is settled.
Also remember that since it’s a criminal case, if you do not attend the court continuously for long period, the court can issue an arrest warrant against you. You have to take bail and be present before the court. So, it’s prudent to take this seriously.
Mandatory legal notice
The payee, however, cannot straight away go the legal way. Under Section 138 of the Negotiable Instrument Act, before filing a cheque bounce complaint, it is mandatory to send a legal notice along with the return memo number as a you within 30 days from the date of bouncing. If no reply is received within 15 days of the delivery of the demand notice, the payee can file the legal complaint within a month.
Steps involved once action is taken
The defaulter (you) will get one more chance to make a fresh payment. Remember, it’s a bailable offense. But if you do not appear before court after receiving summons than court can issue bailable, than non bailable warrant will be issued against you and you can be arrested.
Now, if the cheque issuer (you) fails to make a fresh payment within the said time period of receiving the notice, the payee has the right to file a criminal complaint. However, the complaint should be registered in a magistrate’s court within a month of the expiry of the notice period.
If, for some reason, payee fail to file the complaint within this period, payee suit will become time-barred and will be rejected by the court unless he/ she shows sufficient and reasonable cause for the delay. On receiving the complaint, along with an affidavit and relevant paper trail, the court will issue summons and hear the matter.
Found guilty, you, the defaulter can be punished with a prison term of two years and/or a fine, which can be as high as twice the cheque amount.
Duration of the case
This is a grey area. Considering the amount of pending cases in our legal system, if you attend every hearing and provide sufficent evidence that indicates you didn’t intend to cheat the person who filed the case against you, it can be disposed off in about one and a half years. But if you are inconsistent and if the magistrate has issued a summon, it may take over 3-5 years to dispose off the case. In case, you don’t show up and decide to abscond or leave the city without attending any of the hearings, the case against you will kept in the pending status.