Cheques and balances- Key points to know- Business News

Cheques and balances- Key points to know

Timing and procedure are important while dealing with bounced cheques.

  • January 25, 2016  
  • |  
  • UPDATED   17:09 IST
Cheques and balances
Photo: Rajkumar

In India, cheque bounce cases are the most common financial offences and carry a big penalty for the issuer. But with the government's new norms, there's a bit of relief for victims. Let's look at a few points on cheque-bouncing norms and things to follow that can help you.

New norms for bounced cheques

  • The government has notified the Negotiable Instruments (Amendment) Bill, 2015, which will allow cheque bounce cases at a place where the cheque was presented for clearance and not the place of issue.
  • In the recently concluded winter session, Parliament passed the Negotiable Instrument (Amendment) Bill, 2015.
  • According to the law, a case of bounced cheque can be filed only in a court in whose jurisdiction the bank branch of the payee lies.
  • The new law may help in ensuring a fair trial.
  • The legislation also mandates centralisation of cases against the same drawer.
  • Once a cheque is dishonored, the bank of the drawee gives the banker of the drawer a 'Cheque Return Memo' with reason for the non-payment.
  • Within 30 days of the receipt of the memo, a legal notice is to be sent to the defaulter with all relevant details of the transaction.
  • After the receipt of notice, the drawer of the cheque is bound to make a payment within 30 days of receiving the notice.
  • In the event of failure to do so, the drawee of the cheque can file a criminal complaint at a magistrate's court within a period of 30 days of the expiry of the notice period.

Key points to know about cheques
  • Dishonour of cheque is a criminal offence under the Indian Penal Code as well as the Indian Negotiable Instruments Act.
  • Under Sec 417 and 420 of IPC 1960: the drawer of the cheque can be prosecuted and appropriate punishment may be handed out.
  • To apply Sec 417 and 420 of the IPC, a case of cheating has to be proven.
  • A criminal liability can be established under Section 138 of Negotiable Instruments Act, 1881 too.
  • Under Sec 138, the drawer of a dishonoured cheque may be jailed for 2 years or fined double the amount of the cheque or both.
  • There should always be a minimum balance in your account even after the cheque is encashed.
  • One has to pay heavy penalty due to insufficient funds by the respective banks of the defaulter and the payee.
  • Under RBI guidelines, a bank can stop issuing cheque book facility to a customer who repeats a bounce offence more than four times; valued at over Rs 1 crore .
  • A bounced cheque affects your CIBIL score.