In my decade long practice, I’ve seen an exponential increase in financial crime related cases, especially the Cheque bounce. As per the RBI Statistics the Cheque transactions in India are growing at a rate of 30% CAGR with at least 2.3% being dishonored for various reasons. In the year March 2011 approximately 3 million (30 Lakh) Cheque bounce cases were pending in the country while in the same year RBI statistics published show 130 million (1,300 Lakhs) Cheques processed. Today we still have approximately 2 million financial fraud cases pending in India that include Bank Scams, Loan Repayments, Cheque Bounce, Insurance Frauds, Money Laundering and Hawala too.
One other statistic analyzed by RBI shows 89% of Cheque transaction are less than 1 Lakh, 5% are between 1 to 5 Lakhs and 4% are between 5 to 10 Lakhs. Less than 1% are greater than 10Lakhs.
Of the Cheque bounce cases filed in India 73% were of the amount between 1 to 5, 22.65% between 5 to 10 Lakhs and rest were greater than 10 Lakh per the data published as on March 2011.
What does the bank do when the Cheque is Dishonored
- When a Cheque is dishonored, the drawee bank immediately issues a ‘Cheque Return Memo’ to the banker of the payee mentioning the reason for non-payment.
- The payee’s banker then gives the dishonored Cheque and the memo to the payee.
- The holder or payee can resubmit the Cheque within three months of the date on it, if he believes it will be honored the second time.
- If the Cheque issuer fails to make a payment, then the payee has the right to prosecute the drawer legally.
What legal action can be taken if the Cheque is Dishonored
- Cheque bounce is a criminal matter and is tried under section 138 of Negotiable instruments act, 1881. the dishonor of Cheque is a criminal offence and is punishable by imprisonment up to two years or with monetary penalty or with both. It takes at least 12 to 18 months for the case to be resolved if one decides to take legal action.
Discussion with your Lawyer
- Research for a good lawyer to represent your case, read thru the act either on the internet or legal journals, seek opinion from friends, family before deciding to proceed.
- Meet your lawyer and understand the procedure in details, the legal fees involved at every stage of the case starting from Notice to Final orders. Get all your queries answered and be mentally prepared to appear during the court proceedings and co-operate with the legal procedures during the proceedings. There will be situations that may cause unnecessary delays because of Court holidays,
Legal Notice
- If the drawer makes payment of the Cheque amount within 15 days from the date of receipt of the notice, then drawer does not commit any offence. Otherwise, the payee may proceed to file a complaint in the court of the jurisdictional magistrate within 30 days from the date of expiry of 15 days prescribed in the notice.
- You may wish to read my blog on How to send a Legal Notice and Respond to One
Filing a Law Suit / Legal Case
- If the drawer does not make the payment the payee continues to file the case. Following documents are required to file the case, your lawyer will prepare the relevant affidavits, applications, petitions paying the court fees, stamp fees and all clerical and incidental charges as per the procedure.
1. Original Cheque return Memo
2. Original Dishonored Cheque
3. Name of the Payee
4. Copy of the ID Proof of the Payee
5. Copy of the Address Proof of the Payee
6. Name and Address of the Drawer
7. Copy of the Legal Notice sent to the Drawer
8. Copy of the Reply to the Legal Notice received if any
9. Acknowledgement receipt from the Post Office which the Legal notice was sent
10. Agreement document if any for which the Cheque was collected
11. Email / SMS / WhatsApp message to the drawer regarding this issue if any
Note: In case a document is misplaced / lost, there is a procedure to handle this, it starts with filing an FIR, followed with gathering duplicates from the Bank. One can also look at filing a Recovery Suit and there are multiple ways to handle the case. As a best practice one should either maintain a softcopy or a photocopy of all necessary documents to ensure seamless execution.
- On the date of filing, the payee accompanies the lawyer to the court, signs all the affidavits, applications and copies of the petition. The lawyer gets the documents notarized and proceeds to file the case with copies of the Cheque return memo and Dishonored Cheque
Sworn Statement and Summons
- After filing the case the payee will appear to the court, stand in the witness box and has to give a sworn statement mentioning that all information presented in the petition is true to the best of his knowledge and abides by the same, the sworn statement process may occur on the same day of filing or the court will provide a date on which the Payee appears along with the lawyer and complete this procedure.
- A sworn statement is a legal document that your lawyer prepares stating all the facts that are relevant to this case. This document is very similar to any other type of affidavit, except that sworn statement is not signed or certified by an official such as a notary public. Once the sworn statement is completed, the court will send the summons (notice) via RPAD to the defendant (drawer) ordering to appear to the court on the given date quoting that a law suit is filed against him/her due to Cheque bounce.
- If the accused (drawer) does not appear on the given date, your lawyer following the process will request to resend the summons (notice), the second notice is sent via RPAD to the accused (drawer) asking to appear to the court on the next date.
- If the accused (drawer) does not appear on this date too, your lawyer will exercise the powers of the court and request hand summons to be issued. The court issues the hand summons and the same will be provided to the Payee who has to visit to his jurisdiction police station and accompany a police official to the address where the accused (drawer) resides to personally hand the summons. The summons will be handed over by the police to the accused and order him/her to appear to the court on the given date. If the accused (drawer) is not available to receive the hand summons, the same will be pasted on his door. This will be documented by the police official in his dairy and an acknowledgement will be provided either to the payee or to the court.
Arrest Warrant
- If the accused (drawer) remains absent from successive hearings in connection with this case, the court will issue an arrest warrant, this is non-bailable in nature. Based on this warrant, the police will hunt the accused and arrest him/her.
- As of today the Cheque bounce case is a Bailable offence, the accused (drawer) if carries an anticipatory bail will not be arrested. If not the accused will be arrested and produced to the court.
- The accused may with the help of his lawyer, file an application for bail and seek one. After the Bail is obtained, the accused should be present for all subsequent hearings. Although the accused has a right to file an exemption application to be present for all hearings, its depended on the judge to either pass or reject the same.
Plea
- The accused will be brought before the court and the Magistrate will ask the accused if he/she pleads guilty in this Cheque bounce case.
- If the accused accepts that he/she is guilty and the offence is committed than the case proceeds to evidence stage.
- If the accused does not accept the offence and pleads not guilty than he will be given an option to raise the defense and the accused will have to appoint a lawyer to defend the case. "I will shortly write a Part II of this blog that covers a detailed procedure on How to Defend a Cheque Bounce Case"
313 Statement
- At this stage the court will directly ask the accused a few questions about the offence and will be given an opportunity to present his defense.
- Statement under Section 313 of the Code of Criminal Procedure is taken into consideration to appreciate the truthfulness or otherwise of the case of the prosecution and it is not an evidence.
- Statement of an accused under Section 313 of the Code of Criminal Procedure is recorded without administering oath and, therefore, the said statement cannot be treated as evidence within the meaning of Section 3 of the Evidence Act. The appellants have not chosen to examine any other witness to support this plea and in case none was available
Evidence
Note: The information below is detailed, may not imply applicable for all cases, only in cases that are complex the evidence and cross examination is detailed requiring eyewitness etc…, I am penning it down for the reason that the readers case may be complex, otherwise few steps will not occur in the practical course of the law suit
- Your lawyer will assist you in presenting the evidence either in oral or through an affidavit (preferably) and produce all documents (original and copies) supporting your claim to the court.
- Any document submitted to the court goes thru at least three stages, Filing of documents, marking and tendering documents to the court for evidence, and finally the documents that are held by the court as “Proved – Not Proved or Dis Proved”
- Your lawyer following the procedure as per the evidence act will complete marking the documents as exhibits and tenders them for next stage. The law laid down by the Supreme Court in Sait Taraji Khimechand VS. Yelamarti Satvam is :- 'The mere marking of an exhibit does not dispense with the proof of documents'. The Opposite party has rights to challenge the documents and only after sufficient deliberation and arguments laid down by your lawyer the court accepts or rejects the document as proof, and once proved its formally tendered in evidence. It’s in this stage the court will decide whether they should be admitted or rejected.
- There is a possibility while submitting all relevant documents, a primary evidence is not available, lost or misplaced, in that case a secondary evidence can be submitted. A secondary evidence as a general rule is admissible only when the primary evidence is absent.
- Also note The Supreme Court in M/s Mandvi Co-op Bank Ltd. v Nimesh B. Thakore ruled that in Cheque bouncing cases, the right to give evidence on affidavit, as provided to the complainant under section 145 of the Negotiable Instruments Act, is not available to the accused for expeditious decision in such mounting cases which are chocking the administration of criminal justice system in the country unless until the accused is punished with Imprisonment.
Cross Examination
- Just before the date for cross examination, your lawyer will have a detailed sitting with you and prepare you with the possible questions that may come across your way from the opposite counsel, the sitting for each case is unique and a set of possible if – else scenarios will be shared by your lawyer while you prepare yourself to appear on the day of cross examination.
- The cross examination will focus on the need to establish an evidentiary foundation to admit a document or other exhibit in evidence by the witness and discredit the testimony given on direct examination. The opposite party lawyer may ask you many leading questions to which the answer is usually an “yes”, you need to be well prepared to tackle such questions and in such cases your lawyer may raise objections.
- Many a times its nor required for your lawyer to include both the banks as witness. The law very clearly says that Bank dishonor slip is sufficient proof of dishonor, a statement in the affidavit and properly stamped dishonored slip is sufficient, unless un till it is agitated by accused. The banks should only be called if accused agitates this slip during cross examination, not otherwise.
- In some situations, the opposite party lawyer tries to undermine and impeach the credibility of the witness, and call upon accusing the witness carrying a stake in the outcome, or is under undue influence or also go to an extent to call upon dishonesty. Your lawyer then raises certain objections which are sustained or overruled by the judge.
- The Cross – Examination is like a point scoring game which usually will be used in the closing arguments.
Final Arguments
- Final Arguments will be presented by both lawyers representing you and the opposite party and will reply each other as need be. Post the final arguments both the lawyers rest their case and the case moves to the judgement stage.
- Depending on the availability of the time the Judgement may be given on the same day or a date is given by the court on which the judgement will be announced.
Judgement
- If the accused is found guilty he/she will be punished for the offence with imprisonment extending up to two years, or with fine which may extend to twice the Cheque amount or both. The court may also award interest on the amount and also accept the prayer to cover all the expenses incurred during the proceedings as relief.
- If the accused is found not guilty he/she will be acquitted in this case.
Appeal in higher courts
- Depending on the judgement either party have the provision to appeal within a period of 30 days in the higher courts and fight for their rights. There are multiple scenarios depending on the judgement given may restrict further appeal too.
Footnotes
- Its mandatory for the person or his representative to be present during the proceedings. If he/she is unable to attend the proceedings he/she can grant a GPA for someone who an represent him/her during the proceedings
- Its mandatory to adhere the timelines to issue the notices and file cases on time, failing which the payee may not be able to proceed with the case, nonetheless he/she can file a recovery suit which is a civil case and not criminal in nature, the recovery suit can be filed within 3 years.
- At any above mentioned stage both parties have the rights to settle the matter out of court.
Tentative Timelines from Start to Finish of the Case
Meeting With Lawyer : 1 Day
Preparing the Legal Notice and Sending to the Party : 2 – 3 Days
Awaiting For Reply : 15 Days
Filing the Case : Between 16th Day to 44th Day (30 Days)
Sworn Statement : Same day of filing or the next date given by the court (7 to 15 Days)
Summons sent by court and time given for the accused to appear : 30 Days
Second Notice / Summons send by court and time given for the accused to appear : 15 Days
Hand Summons Procedure and time given for the accused to appear before the court : 15 Days
Warrant : 10 – 15 Days (may get delayed if the party is absconding)
Plea : 1 Day
Evidence : 1 Day ( depends on the dates given by the court … usually a week to 10 days if the opposite party wants to defend his case and has a lawyer representing him)
313 Statement : 1 Day (one has to wait for few days to get the dates from the court)
Defense of the Case … depending on the opposite party lawyer and the evidence he/she presents followed with multiple cross examinations the case may be prolonged for few months
Cross Examination : 1 to 5 appearances in the interval of 10 to 15 days each
Final Arguments : 1 Day (one has to wait for few days to get the dates from the court)
Judgement : 1 Day (one has to wait for few days to get the dates from the court)
Appeal if not satisfied with the judgment : 30 days
I believe the reader of this blog post now will be clear on the procedure, timelines and carries a vivid picture of the steps that one will practically experience. I have put across this information so that the lay man understands all the details before approaching his/her legal counsel. My advice always is to settle the matter out of court, seek your legal counsels assistance to call up the opposite party and negotiate the matter.
Dear friends and readers of my blog post, please feel free to ask questions in the comment section below or email me to lawyersonia@gmail.com and I will respond them if you need further clarifications and suggestions.
All the best 😊
