Bouncing of Cheques

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The legal remedy is to take an action under Section 138-A of the Negotiable Instruments Act, 1881, however before that, we would advice you to use some common sense. The steps have to be taken as under :


First contact the party personally, (meeting or telephonically) and ascertain the reason of the bouncing of the cheque. The party may pay you the amount in a few days time.


In case the party (party means an individual, firm or company or any other body required to be registered) gives you another cheque which also bounces or does not pay on one pretext or the other, you have to take the following legal steps, when the cheque has been dishonoured for any reason similar  to "insufficient funds" :


Issue a notice of demand to the person issuing the cheque, within 30 days from the date of bouncing, giving the party a time of 15 days to pay, further stating that, in case of default in making the payment, action shall be taken under S. 138-A of the Negotiable Instruments Act, 1881. (preferably let an advocate draft this for you - not only the draft is likely to be more proper but shall also carry weightage).


In case the party does not pay, within the stipulated period of 15 days from the receipt of the notice, you are free to lodge a complaint in the court of the magistrate where the cheque was bounced (i.e. where your bank is) or where the party resides or has business. The complaint can be lodged within 30 days of the expiry of the period given for payment. It has to encompass the signatory of the bounced  cheque and other responsible persons for the issuance of the cheque, in case it is issued by anybody other than an individual.


In case the reason for the bouncing of the cheque given by the bankers is other than those similar  to "insufficient funds", if you believe the party is actually not interested in actually paying you, you are advised to contact a suitable lawyer at the earliest.


In case the party seems to actually defraud you of the funds, under the amended laws, you can make a complaint to the police for cheating and also where appropriate criminal breach of trust, with a request to recover the amount.


In any case, when you are sure that the person issuing the cheque is legally bound to pay you, you can always file a civil suit for the recovery of that amount, amongst other dues.


Always Check the costs involved viz-a-viz the benefit i.e. the amount of cheque, and any interest that you are likely to gain, before going into the litigation. Costs may include some hidden costs.