In India, cheques are commonly used for business transactions due to their reliability. But what happens when a cheque bounces? It can cause major headaches, especially if the person who issued the cheque is a partner in a business. A bounced cheque can lead to legal issues, financial losses, and strained business relationships. This blog explains what you should do if a cheque bounces, including the steps to take, timelines for legal action, and how to deal with a partnership dispute.

What is a Cheque Bounce?

A cheque bounce happens when the bank refuses to pay the amount mentioned on the cheque. This could happen for various reasons, such as:

• Insufficient funds in the account of the person who issued the cheque (called the drawer).
• Signature mismatch or incorrect details on the cheque.
• The cheque might be stale (old and expired) or post-dated.

In India, Section 138 of the Negotiable Instruments Act makes it a criminal offense if a cheque bounces due to insufficient funds. If you are the one receiving the cheque, you have legal options to take action.

Legal Steps to Follow When a Cheque Bounces

If you receive a cheque that bounces, you can follow these steps:

Get the Bank’s Return Memo

When the bank refuses to honor the cheque, it will issue a return memo that explains why the cheque was dishonored. The most common reason is that there are insufficient funds in the drawer’s account.

Send a Demand Notice

Under Indian law (Section 138 of the Negotiable Instruments Act), you must send a demand notice to the person who issued the cheque within 30 days from the date the cheque is returned.

• What should the demand notice include? The notice should ask the person to pay the amount on the cheque within 15 days of receiving the notice.
• How to send the notice? You should send the notice by registered post to make sure you have proof that the person received it.

Wait for 15 Days

After sending the notice, the person who issued the cheque has 15 days to pay the amount. If they do not pay within this time, you can take legal action.

Legal Action

If the person does not pay the money within 15 days, you can file a criminal complaint in the Magistrate Court. The complaint must be filed within 30 days after the 15-day period for payment expires.

• Criminal Consequences: If the person is found guilty, they can face up to 2 years in prison, or a fine (up to double the amount of the cheque), or both.

Additionally, you can also file a civil suit to recover the money through the regular courts, where you can ask the court to order them to pay the cheque amount.

What Happens if the Bounced Cheque Involves a Business Partnership?

Things can get more complicated if the cheque that bounced was issued by a business partner. When business partners use cheques for transactions and one of them issues a cheque that bounces, it can cause financial and legal problems for the entire partnership.

How a Bounced Cheque Affects Partnerships:

1. Financial Responsibility: If a bounced cheque causes financial loss, the other partners might argue over who is responsible for the mistake. For example, if the business partner did not manage the funds properly, they might be held responsible.
2. Breach of Trust: A bounced cheque may also be seen as a breach of trust between partners, as partners are supposed to manage the business funds responsibly. This can lead to arguments or even the breakdown of the partnership.
3. Legal Action in Partnership Disputes: If the bounced cheque leads to financial loss or mismanagement, partners can take legal action. If necessary, the partnership can be dissolved, and the mismanaging partner may be required to pay compensation.

Timeline and Process for Legal Action After a Cheque Bounces

Here’s the simple timeline and steps to follow if you have a bounced cheque:

1. Cheque Bounces – The bank returns the cheque with a reason (e.g., insufficient funds). You get the return memo from the bank.
2. Send a Demand Notice – You must send a legal notice to the person who issued the cheque within 30 days of the bounce. This notice demands payment within 15 days.
3. Wait for Payment – The person has 15 days to pay the cheque amount.
4. File a Complaint – If the person doesn’t pay within 15 days, you can file a criminal complaint with the court within 30 days of the notice period ending. The cheque bounce lawyer will help you to file a civil case in a regular court to recover the money.
5. Court Proceedings – The court will then decide the case. If the person is found guilty, they could face penalties, including imprisonment or fines.

What to Do if a Non-Bailable Warrant is Issued in a Cheque Bounce Case?

In some cases, if the person who issued the bounced cheque refuses to appear in court or avoid the legal process, the court may issue a non-bailable warrant. This is a legal order that allows the police to arrest the person and bring them to court.

Steps to Take if a Non-Bailable Warrant is Issued

1. Wait for Police Action – Once the court issues a non-bailable warrant, the police will attempt to arrest the person and bring them to court. As the person who filed the complaint, you don’t need to take direct action, but you should cooperate with the authorities if necessary.
2. Bail – The person can apply for bail, but since it’s a non-bailable warrant, the chances of getting bail are lower. If bail is granted, the legal proceedings will continue.
3. Continue Legal Proceedings – After the person is arrested, the case will continue, and they will have the chance to defend themselves in court.

How Zolvit Can Help in Legal Matters

At Zolvit, we know that dealing with cheque bounce cases or partnership disputes can be stressful and confusing. Our team of experienced lawyers is here to help you through the process. Whether you need help sending a demand notice for a bounced cheque, filing a complaint, or resolving a partnership issue, we provide the support you need.

We make sure you follow the right steps, on time, to protect your rights and resolve issues quickly. With Zolvit, you have trusted online legal experts on your side.

Conclusion

A bounced cheque can be more than just a financial inconvenience. It can lead to serious legal consequences, both for the person who issued the cheque and the person who received it. If you are the one whose cheque bounced, it is important to understand your rights and the legal steps you can take to recover the money.

If you are in a partnership, the bounced cheque can complicate matters further, and you may need to take legal action against the partner responsible. The law provides a clear process to address bounced cheques, and by following the proper steps—sending a notice, waiting for payment, and filing a complaint if necessary—you can ensure that you are legally protected.

If a non-bailable warrant is issued, it’s important to stay informed about the legal process and cooperate with authorities. Ultimately, understanding the legal steps and timelines will help you navigate cheque bounce cases and partnership disputes with confidence.

Contact Zolvit today to get reliable legal help and make the process simpler and faster. Let us handle the legal side, so you can focus on your business.