Dishonour of Cheques for Insufficiency of funds in account
DISHONOUR OF CHEQUES FOR INSUFFICIENCY OF FUNDS IN ACCOUNT (S 138 OF NEGOTIABLE INSTRUMENTS ACT):
This section deals with any cheque returned by the bank due to insufficiency of funds in the drawers account. Drawer is the person giving the cheque and payee is the person to whom the cheque is given. The payee has to provide a notice in 30 days, the drawer gets 15 days after the completion of the 30 days of providing the notice, to make the payment. If the drawer still doesn’t pay the amount then a suit can be instituted within 30 days (limitation period).
For Eg: Drawers cheque has been dishonored on 1st Jan and Payee sends notice on 2nd Jan so the drawer has to make the payment by 15th of February. Being 29 days from 2nd Jan + 15 days.
IF THE CHEQUE WAS ISSUED AS A GIFT, DONATION, OR ANY OTHER OBLIGATION WHICH IS NOT LEGALLY ENFORCEABLE, THE NEGOTIABLE INSTRUMENTS ACT DOES NOT APPLY.
A cheque cannot be presented after a notice has already been sent to the party. Hence, it is important that case should be filed before the expiry of the above limitation period. HOWEVER, IN CASE A CHEQUE IS DISHONOURED AND A NOTICE HAS NOT BEEN SENT WITHIN STIPULATED TIME OF 30 DAYS FROM THE DATE OF RETURN MEMO, THEN CHEQUE CAN BE PRESENTED AGAIN WITHIN ITS VALIDITY OF 6 MONTHS AND NOTICE CAN BE ISSUED IN CASE OF A DISHONOUR