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Recovery of the cheque amount in case of Dishonour of Cheque for the reason of insufficient funds
In most of the business transactions payments (re-payment of loan or payment of fees) are made by cheque, which are sometimes remain unpaid and returned by the bank on which they are drawn. In such a case of dishonor of cheque one can file a suit for recovery of the amount under Order XXXVII of Code of Civil Procedure 1908. One can also file a Criminal complaint u/s 138 of Negotiable Instrument Act. But before filing the complaint a statutory notice is liable to be given to the defaulter.
When the holder/payee presents a cheque in the bank (within the period of its validity)and the cheque bounces because of insufficient fund in the account the bank issues a 'cheque return memo', stating the reasons for non-payment. The holder can present the cheque again to the bank for clearance. If the holder again got the information of dishonor of the cheque, on receipt of the information about the dishonor of the cheque he can send a notice to the defaulter/company within 15 days from the receipt of the cheque return memo or the receipt of the information of dishonor of cheque indicating the reason of dishonour and demanding the amount of dishonoured cheque. If the defaulter fails to pay the amount within 15 days of receiving the notice, the holder can file a criminal complaint in a magistrate's court within one month on the expiry of 30 days period of notice .In case of failure to file the complaint within this specified period, the suit will become time-barred and the court will not proceed the case unless he/she prove 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. If found guilty, the defaulter can be punished with imprisonment for a term which may extend to one year or with fine, which may extend to twice the amount of cheque or with both.
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