Facing a false cheque bounce case in a business dispute? Understand legal defence options, documents, Section 138 NI Act issues and MSME remedies.
Advance receipts, security cheques, loan / supply agreements, delayed payments are part and parcel of routine business transactions. The cheque that you issued or received as part of a business transaction can lead to initiation of legal proceedings alleging non-payment when your business partner / investor / supplier / debtor attempts to recover the money by resorting to coercive measures under cheque bounce laws.
False cases for cheque bounce are filed with an intention to harass the genuine businessmen, MSMEs and small company owners. Apart from the harassment through litigation, such false allegations can adversely affect your goodwill, business relations and future credit dealings.
Many people think that once the cheque bounce notice is served to you, you are automatically guilty. That is not the case. There are numerous legal technicalities which needs to be examined in a cheque bounce complaint filed under Section 138 NI Act, 1881. For instance, the cheque was issued for repayment of a legally enforceable debt or liability.
Most cheque bounce cases are filed when there is some level of disagreement between the parties about the underlying transaction for which the cheque has been issued. A cheque issued as collateral/ security; a cheque given as consideration for a disputed amount; a cheque given part of a larger business transaction which has fallen through; a cheque presented by the payee which goes against the terms of the underlying contract.
MSME owners are often frazzled by cheque bounce suits. On top of managing the day to day financial operations of the business i.e. cash-flow issues, suppliers & creditors; employees and existing market pressures – a legal notice or summons from court can be very overwhelming, leaving the business owner very confused about their next steps.
Nine times out of 10 the dispute between the parties has very little to do with the cheque itself. The disagreement is about the entire commercial dealings of which the cheque was only a part. Was there an invoice raised? Were goods dispatched but deemed to be of poor quality? Did the parties have a contract? Was the payment due to be set off/adjusted against some other liability?
Defences available in response to a cheque bounce complaint will depend on the facts and evidence in each individual case. A person or business being accused of cheque bounce fraud can produce their own documents and defend themselves against the claim in court.
Common defences used against cheque bounce charges are proving that there was no enforceable debt outstanding on the date the cheque was dishonoured; that the cheque was provided as collateral only; that payment was already made; or that there were issues with the underlying commercial transaction.
Business owners should not ignore a legal notice or court summons. The more you delay in responding to the accusation, the more difficult it can be to defend yourself.
A Cheque Bounce Defence Lawyer can review any contracts, payment history, communications, invoices and any other business records you have to determine what legal position you may have. Proper legal representation ensures your side of the story will be heard in Court.
Section 138 of NI Act, 18 81 deals with dishonour of cheque for discharge of debt or liability. A complaint for cheque bounce requires meeting up with legal technicalities of dishonour of cheque, issuing statutory notice and filing complaint within limitation period.
One must understand that dishonour of cheque every time doesn't give rise to criminal liability. Nature of transaction to which cheque is issued, intention with which cheque was given, purpose of issuance and whether there existed any liability are some of the factors considered by Court.
Courts also look to see what evidence is produced by the parties in business disputes. Whether there was any agreement entered into, transactions were made by way of entry in account books, correspondence and other matters would influence the further proceedings.
Cheque bounce complaints are related to documents which underlie the actual business transaction. Defence is not drafted by speaking. Courts look at written evidence; financial documents and correspondence between parties.
Documents will help you (businesses & MSMEs) prove that the cheque was issued against an existing liability; or for purpose of providing security; or was an advance received; or for any other genuine commercial purpose
Some Documents which will be useful include:
Some Documents which will be useful include:
Owners focus on the cheque amount mentioned in the complaint.
Many don’t even see the history of previous payments or disputes(if any).
The very dispute could have arisen say at a date earlier than what is stated for non-payment/non-performance/disagreement on the mentioned liability.
Whether a cheque was issued for a legally enforceable debt or liability would be the crux of any complaint under section 138 NI Act for cheque bounce. This issue is at the center of most business disputes and would typically be the main sword & shield.
The Court would examine the facts and circumstances leading to the issuance of cheque, including the underlying agreement between the parties, the account books of parties and the documents produced before it during the trial.
Merely on the allegation that a cheque was issued and got dishonoured, the defence of the accused cannot be taken away. In case of commercial disputes, not every business dispute would override the liability. Every circumstance of the evidence, facts and the legal position with respect to the said dispute would be considered.
MSME’s transacting cheques against supply agreements, in partnership transactions, loan advanced by one company to another company, advance received or during a settlement must be wary of this aspect.
There can arise many occasions when you may require legal consultation such as service of Cheque bounce Notice, summon/Court Complaint for recovery in case of disputed business transaction. Legal advice becomes more relevant where cheques were issued as indemnity /collateral security, set off of accounts between parties is disputed, payment was made or relationship between parties has ended.
BK Singh Advocate / Lawyer / Firm Name (DRT LAWYER) can help you get your facts straightened out, analyze your legal position and organize your documents before you take any further action. We try to figure out what actually happened and preserve your procedural rights.
MSME cheque bounce dispute often involves more than one payment. The cheque in question could have been issued under supply contracts, vendor agreements, service agreements or financing agreements between businesses.
BK Singh & Associates will help you review your commercial records, understand your contractual obligations and the legal issues involved in a cheque bounce dispute. Being prepared will help you understand where you stand with your business instead of simply reacting to allegations.
Lawyers for MSME can assess your situation with respect to payment disputes between businesses and the laws involving cheques. We will review your documents and understand the commercial context of your situation along with the applicable legal process.
Book a free Consultation to understand the nature of your dispute, possible resolutions and need for proper legal representation with BK Singh Advocate / Lawyer / Firm Name. (DRT LAWYER)
Yes, your business can place your defence in a cheque bounce proceeding by responding to the complaint filed and placing your evidence before the Court. Facts would determine your defence whether cheque was issued for a particular purpose, was there any liability existed on your part, what were the records of the transaction and communication between the parties etc.
No, every dishonoured cheque would not attract punishment. Only after fulfilling the legal requirements under Section 138 NI Act, 18 81 and upon verifying the facts criminal liability can be established with respect to the said transaction.
Cheque issued as security can also become subject matter of dispute. Courts have looked into the facts and circumstances of the case to analyze whether there was any actual legally enforceable debt or liability existed at the time of presentation of cheque.
Agreement, invoice, Bank statement, records of payment, supportig email/messages, account statements can help you businesses in putting forth the nature of underlying business transaction before the court.
Your business should review the notice, preserve the record of transaction and understand your rights/legal position before responding to the notice. Ignoring the court correspondence may lead to unnecessary hardship for your business.
Settlement is always an option which parties can explore depending on facts and circumstances. But one should be cautious of the terms of the settlement and the legal effect of the same. Once entered into, it should be properly documented.
Cheque bounce under Section 138 NI Act is a criminal proceeding. However, the underlying transaction which gave rise to the dispute is usually a civil/ commercial transaction between businesses.
Accused can always defend himself by pleading the appropriate legal defences. Generally the Courts look into the facts and transaction of the parties and the evidence placed before it.
Cheque disputes arise out of contract or agreements between the parties in business. A Lawyer would help you understand your records and transactions better, explain your legal options and help you craft your response based on facts.
BK Singh Advocate / Lawyer / Firm Name (DRT LAWYER) can help your businesses by reviewing your cheque bounce case and helping you understand the legal options available to you. We can prepare your response for you based on the transactions carried out between the parties and the documents you have.
Cheque bounce case complainant can be a frustrating situation for businesses. Particularly those who depend on cash flow and reputable business exchanges. Just because you have been presented with an dishonoured cheque doesn’t mean it is cut and dry. Details of the transaction, legal responsibility and evidence are all taken into consideration.
Always have written agreements, payment proofs and communication for any issues that occur within business transactions. The sooner you are aware of the situation you can avoid errors and let the case move forward through the proper legal stages.
At BK Singh Advocate / Lawyer / Firm Name (DRT LAWYER) we focus on informing businesses about cheque dispute cases, paperwork and legal responsibilities involved with business transactions. Each case is different we like to go over the events leading up to the situation to advise what legal processes should be taken to help you.
Speak with Advocate BK Singh about your legal rights you may be entitled to.
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