1. What are the steps to be taken when a cheque is dishonoured for the want of sufficient funds? Can I take legal action to get the amount cleared?
a. A complaint under Section 138 the Negotiable Instruments Act can be filed and also a summary suit for recovery of the cheque amount along with the cost & interest under order XXXVII of Code of Civil Procedure 1908. Before filing the said complaint u/s 138, a statutory notice is to be given to the opposite party.
2. My cheque inssued by a company got dishonoured few months back and the limitation for filing a complaint is over. Can I do anything now?
b. A suit for recovery of the amount under Order XXXVII of CPC can e filed. The cheque is valid for three months from the date of issue. Present the cheque once more and on receipt of the information about the dishonour of the cheque, straight away issue notice within 30 days from the receipt of the information of dishonour of cheque. If the company does not pay up within 15 days, then you can file complaint under Section 138 within 30 days from the date of the 15 day notice period expiration.
3. I am the owner of a distribution company. During course of business I had supplied goods worth Rs. 4, 00,000. The client had issued cheques which were dishonoured. I have filed a case against him. Then he paid Rs. 1, 00,000 and absconded. I cannot trace him despite the Court having issued proclaimed offender notice. He has closed his account and banks are not cooperating with his other address. Can I do something to address this situation?
a. The proceedings of declaration of proclaimed Offender needs to be completed and then the accused will be declared a Proclaimed Offender and may also be arrested at any time. Also file a Suit for Recovery with the last known address of the accused.
4. A cheque I was given was dishonoured. I have informed the person in writing but received no reply whatsoever. Should I register a case of cheating? If yes, where should I file it?
a. When you have informed the person about the dishonour of the cheque, in case the information is given within 30 days from the dishonour of the cheque, file a Complaint under Section 138 of Negotiable Instrument Act. A case of cheating is not maintainable legally unless the facts and circumstances of the case can justify the filing of cases under section 420/ 406 of the Indian Penal Code wherein the intent to cheat must be established.
5. Blank cheques were given to me by a partnership firm against a loan I had advanced to them. If they close the firm, will I be able to use those cheques and recover my money?
a. Fill the cheques and present for encashment. The Partnership Firm as well as partners are personally liable and even after dissolution also the firm and partners are liable. If the cheques get dishonoured follow the procedure under Section 138 of Negotiable Instruments Act or file a suit for recovery as per Order 37 of Code of Civil Procedure, 1908.
6. Where to file complaint case under Section 138 N.I. Act?
A complaint case under Section 138 N.I. Act can be filed in any competent court in whose jurisdiction any of the following acts have occurred:
a) Place of drawing of the cheque; where cheque was issued
b) Address of bank where cheque was presented
c) Address of bank where cheque is payable
d) Place from where notice was received by drawer of cheque
Each of these four acts could have occurred at different localities. The complainant can choose any one the above places to determine jurisdiction of court where they wish to file complaint.
7. How long after notice has been served can I file a case against the drawer?
After giving notice you need to first wait for 15 days to see if the other party pays up or not. If they do not then file a complaint case against drawer under Section 138 N.I. Act within 30 days from the expiry of notice period i.e. 15 days. Failure to do so will lead to loss of remedy under Section 138 N.I. Act; but you can file a summary suit for recovery of money within 3 years from date of issue of cheque and initiate criminal proceedings under Section 420 I.P.C. if the facts of the matter warrant it.
8. What can I do if I do not have the drawer’s address?
Send the notice to the last known address. In case of change in address of the drawer and in case he has not left a forwarding address and the notice is returned because the addressee is not available at the address or addressee has left without leaving a forwarding address then file a complaint case after 15 day of receipt of such information or returned notice and within 30 days from expiry of notice period.
9. How long after receiving information of dishonour of cheque do I have to serve notice to the drawer?
You need to serve a legal notice to drawer of cheque demanding payment of cheque amount within 30 days of the receipt of information from your banker regarding dishonour of cheque under Section 138 N.I. Act.
10. If the cheque was given for a reason other than to discharge a legally enforceable debt or other liability will NI Act apply?
In cases where cheque was given for a reason other than to discharge a legally enforceable debt or other liability, the provisions of Section 138 N.I. Act are not applicable e.g. Cheque given as gift, in charity, donation etc.
11. Define legally enforceable debt or other liability.
Legally enforceable debt or other liability is such which is contracted in accordance with law and which is not opposed to public policy viz., wagering contracts, debt obtained for running a drug cartel or gambling institution etc.
12. Why is remedy available under Section 138 N.I. Act preferred most?
Section 138 N.I. Act provides a speedy and effective remedy to holder of dishonoured cheque. Summary suit for recovery of money takes time (approximately 3 to 5 years) and criminal proceedings under Section 420 I.P.C. does not provide any provision for recovery of money and is meant only for prosecution.
13. What is a summary suit for recovery of money?
Summary suit is a civil legal proceeding initiated for recovery of money due under any written agreement, cheque etc. These proceedings are different from normal recovery suit, as here the liability to prove that petitioner is not liable to recover any amount is on defendant for which he needs to obtain leave to defend from the court.
14. What is the validity of the cheque in day to day business?
From April 1, 2012 the validity of a cheque has been reduced to three months as per recent directive of RBI (under Sec. 35A, Banking Regulation Act, 1949)
15. Checklist of documents / evidences at the time of filing complaint case under Section 138 N.I. Act?
Checklist of documents / evidences:
a) Proof of service of notice – receipt of postal department / courier
b) Copy of notice
c) Cheque in original
16. The drawer wants me to settle at a reduced value. What should I do?
Its up to you completely. The good thing about this settlement is that it will save your time and money. Now-a-days courts are also encouraging amicable settlement between the parties. However, if you settle the dishonoured cheque amount at a reduced value, you will lose all remedies available under law.
17. What remedy do I have if the drawer delays in settling after conviction?
In 2010 the Supreme Court has laid strict rules to deal with delaying tactics. Delay in settling cheques bounced will cost up to 20% of the cheque amount post-conviction. This is detailed as: 10% at District Court level; 15% at the High Court level; and up to 20% at the Supreme Court level. For e.g., Defaulter going for settlement will have to pay 10% of the cheque amount to avoid going to the jail.
18. Will it be possible to recover interest and legal expenses from the drawer of the dishonoured cheque?
Yes, you can recover interest and legal expenses from the drawer of the dishonoured cheque in a summary suit for recovery of money, but not in the proceedings initiated under Section 138 N.I. Act. However, under Section 138 N.I. Act the award maybe higher than the cheque amount as fine.