Q1. What is a Negotiable Instrument ?
Negotiable instrument is a transferable instrument which contains a value in order to pay the specified amount to the holder or in order to pay a specific amount on issue.
PROMISSORY NOTE- A promissory note refers to a written promise to its holder by an entity or an individual to pay a certain sum of money by a pre-decided date.
BILLS OF EXCHANGE - Bills of exchange refer to a legally binding, written document which instructs a party to pay a predetermined sum of money to the second(another) party.
CHEQUE- A cheque refers to an instrument in writing which contains an unconditional order, addressed to a banker and is signed by a person who has deposited his money with the banker. This order requires the banker to pay a certain sum of money on demand only to the bearer of the cheque or to any other person who is specifically to be paid as per instructions given.
Q2. What legal action can be taken against the cheque bounce/dishonour of cheque?
The payee/holder of the cheque can file a criminal case under section 138 of Negotiable Instrument Act against the drawer of the cheque and simultaneously can also file a civil case for recovery.
Q3. Whether cheque bounce is a criminal offence?
Answer: Yes, Cheque Bounce is a criminal offence.
Q4. Whether cheque bounce is a punishable offence?
Answer: Yes, cheque bounce is a punishable offence and the drawer/signatory of the cheque can be punished with imprisonment for a term which may extend to two years, or with fine which may extend to twice the amount of the cheque, or with both.
Q5. Whether criminal and civil cases can be filed simultaneously?
Answer: Yes, criminal and civil cases can be filed simultaneously.
Q6. In what circumstances does cheque bounce not amount to an offence?
Answer: The circumstances in which a cheque bounce does not amount to an offence are numerous in number. Some of the instances are:
When the cheque is given as an advance.
When the cheque is given as a security.
The disparity in amount stated in words and figures.
Alterations in cheques require attestation by the drawer.
If the cheque is found mutilated.
When a cheque is issued to a charitable trust as a gift or donation
Q7. In what circumstances does cheque bounce amount to an offence?
Answer: Circumstances in which cheque bounce amounts to offence are-
when the cheque is issued against a legal liability.
when the cheque in question is dishonored with the reasons either insufficiency of funds, account closed, payment stopped by the drawer and similar other reasons.
Despite receiving the demand notice the drawer of the cheque fails to make the payment within 15 days from the receipt of the notice.
Q8. Whether the signatory of a cheque is responsible for the Dishonour of the Cheque?
Answer: yes, the signatory of cheque is clearly responsible for the dishonour of the cheque as by hon’ble Supreme court held in the matter of S.M.S. Pharmaceuticals Ltd vs Neeta Bhalla & Anr decided on 20 February, 2007.
Q9. Whether a Director of a Company be held liable for dishonour of a Cheque even though at the time of commission of the offence the said Director was not in charge of and responsible for the conduct of the business of the company?
Answer: No, a Director of a Company cannot be held liable for dishonour of a Cheque if at the time of commission of the offence the said Director was not in charge of and responsible for the conduct of the business of the company.