A cheque is a type of payment that is extensively used for activities such as loan repayment, wage payment, bill payment, and so on. Banks handle and clear the vast majority of checks on a daily basis. Checks are simply evidence of payment. Cheques, on the other hand, are certainly a dependable means of payment for the vast majority of individuals. In contrast, issuing crossed “Account Payee Only” cheques is desirable and even required to ensure that the cheque is not abused in any manner, shape, or form. A cheque is a negotiable instrument that comes in two varieties: crossed and account payee cheques, which are non-negotiable by anybody save the payee. The issued cheques must be deposited into the payee’s bank account.
The legal definition of the author of the check is ‘drawer’ and the cheque is written in favour of the ‘drawee’ and the paying bank is commonly known as the ‘payee’. Cheque bounce situations have become extremely regular in recent years. Large check sums are occasionally left outstanding, and payee banks return them dishonoured.
Cheque dishonour occurs in the drawee bank submitting a ‘Cheque Return Memo’ to the payee’s banker as soon as possible, outlining the cause for the non-payment of the cheque. The payee’s banker then returns the memo and the dishonoured cheque to the payee. If the drawer feels the issued cheque will be honoured the second time around, the cheque can be reissued or the payee can reissue the cheque within three months of the cheque date. However, if the issuer of the cheque fails to make a payment, it is the payee’s prerogative to pursue legal action against the drawer.
The payee may lawfully prosecute the defaulter/drawer for the fact that the check was dishonoured. The sole exception to this rule is if the check payment is for the purpose of discharging debt or other defaulter responsibilities owed to the payee.
In the instance of a gift cheque, which may have been used to secure a loan or for illicit reasons, the drawer is immune from prosecution.
Legal action Which will be taken
If the payee decides to pursue legally, the payer should have the option of promptly returning the cheque amount. The opportunity should only be offered in the form of written notification.
The drawer should get the notification within a month after receiving the “Cheque Return Memo” notice from the bank.
The drawer should get the notification within a month after receiving the “Cheque Return Memo” notice from the bank. The notification should further mention that the cheque amount must be paid to the payee within a fortnight of the issuer receiving the notice. If the cheque issuer is unable to pay within a month of receiving the notification, the payee has the right and the authority to file a criminal complaint under Section 138 of the Negotiable Instruments Act.
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