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Cheque Bounce : Section 138 Negotiable Instrument Act

In the time of digital India, cheques have become a major source of financial dealings. With increase in transactions the frauds related to this have also become a major problem, because the payment is not on the spot like cash. Many of us face difficulty in realizing the payments given to us by way of cheque. Cheque Bounce is a very big and common issue in today's time. Still, most of us are completely unaware of the legal procedure in case of cheque bounce. So, friends today we are going to discuss the procedure to claim the amount in the case of Cheque bounce.

1. The cheque must have been issued in discharge of legally recoverable debt. 

2. The cheque is duly filled, and the name is correctly written on the cheque in whose favor the cheque has been issued.

3 The cheque received is duly deposited by holder of the cheque in his/her bank account within the period 3 months from the date of issue. 

4. After that if the cheque is bounced, bank will inform the holder of the cheque by issuing a return memo specifying the reasons of dishonor.

5. The common reasons for the dishonor of a cheque are :
   a) Insufficient funds
   b) Account closed 
   c) Exceeds payment arrangement 
   d) Payment stop by the drawer 

6. In case of the above scenario, holder of the cheque can take recourse to section 138 of the Negotiable instruments act 1881, which has been formulated especially to make transactions more creditworthy and reliable.

7. As soon as the cheque gets dishonored, holder of the cheque has to send legal notice demanding the cheque amount either in person or through his Counsel for recovery within 30 days of issue of return memo (mentioned in 4 point above). 

8. Notice should intimate the drawer about the dishonor of the cheque and give him an opportunity to pay the amount mentioned in the cheque within 15 days from the receipt of the notice.

9. If he fails to make the payment, the person in whose favor the cheque has been issued, can file a criminal complaint under section 138 Negotiable instruments act 1881, within 30 days from expiry of 15 days period as mentioned above. 

10. As per latest amendments, the branch where the proposed complainant deposits the cheque will determine the jurisdiction of the court where the complaint may be instituted. 
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Location: India

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