A month post-dated cheque was issued to me against a friendly loan amount by my friend. When I deposited cheque the same bounced. The remarks of Bank are “refer to drawer of cheque”. I called my friend, he is not responding my calls and is away from city and seems has also left his office job. What legal action I can take.

It's friendly loan. Better resolve it friendly but within limitation time.

The bank can dishonor a cheque on many grounds e.g.:
• Insufficient Funds
• Stop Payment Instructions by cheque drawer
• Post dated or Ante dated cheques,
• Cheque amount in figure and numbers may not be matching
• Signature of drawer not tallying,
• Cheque is over written or materially altered,
• Funds are available in account but are allocated for some other purpose by the bank.
• date of cheque not clear or altered or over written
• The account is closed by the drawer of cheque etc. etc.

The dishonor of cheque is an offense under Section 138 of Negotiable Instruments Act on the following grounds only when the cheque is dishonored on the following grounds:
i) no funds or insufficiency of funds in the account to cover cheque amount
ii) Stopped Payment instructions by the drawer
iii) Closure of account by the drawer

Further, to attract Section 138 of NI Act it must be proved that the cheque was issued by the Account holder to:
a) cover his debt whether full or part or any other liability of the account holder.
b) The Cheque was presented by the drawee to the bank within six months from the date of its issue or within the period of its validity.
c) The reasons by the bank should be clearly mentioned that “unpaid due to insufficiency of funds or payment stopped by the drawer of cheque” or “the account is closed"

After receipt of bounced cheque with slip of bank with either of the above remarks, the drawee has to issue a notice to the drawer and asking to pay the dishonored cheque amount within 15 days else further action under Section 138 of Negotiable Instrument Act will be initiated against the drawer.

The Notice to drawer must be issued within 30 days from the date of receiving the dishonored cheque by the drawee.

d) After 15 days if amount remains unpaid then a criminal complaint can filed within a period of thirty days from the date on which the cause of action has arisen against the drawer of cheque To say in other words. from the date of issue of notice i.e. 15+30 = 45 days the drawee needs to file complaint case against drawer.

If the drawee could not take action in 45 days then due to limitation he losses the remedy under Section 138 Negotiable Instruments Act and he will need to opt to file a summary suit for recovery of money and simultaneously initiate criminal proceedings under Section 420 I.P.C. within 3 years from date of issue of cheque.

Ibrahim Deshmukh
Legal Consultant
[email protected]