The Lila

A Cheque is an essential instrument in business transactions. Transaction through cheque is one of the safest ways of managing business as it can be traced back if required. However, the only setback with the cheque is the chances of it getting dishonoured, which could be for technical reasons or because of the shortage of funds in the respective account. In the following article we are going to discuss the proper procedure to be followed to send a Legal notice under section 138 of the NI Act , in case of a cheque bounce- Parties involved in transaction by a cheque- Drawer- Customer or the account holder who issues the cheque Drawee- Basically the Bank on which the cheque has been drawn, is called the ‘Drawee’. Payee- The individual named in the cheque for getting the payment.  Cheque Bounce-  It is a term basically used to define the unsuccessful processing of a cheque due to various reasons. Non-sufficient funds in the account of the issuer is one of the major reas...

With the increase in industrialisation, business transactions are widely being done with the payments through cheques. As the mode of payment through cheques rose, so did the number of cases reporting cheque dishonour and cheque bounce, which resulted in the need to criminalise the offence of cheque bouncing or dishonour. Hence, in the year 1988, criminalisation of the written cheques was introduced in the Negotiable Instruments Act, 1881.  What is Cheque Bounce ? When the bank returns any cheques unpaid due to the insufficiency of the funds in the drawer’s account and for many other reasons, the cheque shall be called to be bounced. It is also called cheque dishonour, as it is a dishonour of payment by the drawer due to some reason. It is the Drawer who issues the cheque, while the one in whose favour the cheque is issued is the Drawee. What are the reasons for a Cheque Bounce ? After a cheque is bounced, the respective issues a cheque return memo as well as the reason for the ch...