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Cheque Bounce Notice

Cheque Bounce NoticeA cheque is a bill of exchange which is payable on demand. There are two parties in a transaction, the person who issues the cheque is known as the drawer, whereas the person under whose favour the cheque is issued is known as the drawee. A cheque bounce is a situation in which the cheque cannot be processed because of the insufficient funds that are available in an individual’s bank account. There are many reasons which can lead to a cheque bounce. To overcome such scenarios, the drawee issues a cheque bounce notice or a demand notice to the drawer. The Cheque bounce notice states that if the amount due is not paid within the prescribed time, and then the drawee will initiate legal proceedings under section 138 of the Negotiable Instruments Act 1881 against the drawer.According to section 13 of the Negotiable Instruments Act 1881, a negotiable instrument means a bill of exchange, promissory note, or a cheque. The cheques are governed under the Negotiable Instruments Act 1881. Section 138 of the Negotiable Instrument Act 1881 states the provision relating to the dishonour of cheque for insufficiency of funds in the bank account. If there is any cheque issued by the drawer to the drawee to pay any amount and the cheque is returned/dishonoured by the bank because of the insufficient amount in the bank accounts to honour the cheque. The cheque is also dishonoured if it exceeds the amount that has been arranged to be paid from that bank account (by an agreement made with the bank). Hence, an individual can file a criminal case under section 138 of the Negotiable Instrument Act 1881, and it can also file a Summary suit under Order 37 of the Criminal Procedure Code 1908. ReasonsFollowing are the reasons behind a cheque bounce:?·        A wrong date mentioned on the cheque: It has been observed that the drawer of the cheque mentions a wrong date in the cheque which results in cheque bounce. Not only the wrong date but if the drawer mentions a date which is more than three months old, then also the cheque is dishonoured by the bank. Moreover, if the cheque is post-dated and the drawee deposits the cheque earlier than the date, it results in cheque bounce. To avoid committing the default of cheque bounce, the drawer must mention the correct date in the cheque.·        Signature is mismatched: The bank will dishonour the cheque if the drawer’s signature is mismatched. It has been observed that many times people tend to forget their signature and end up signing a wrong signature on the cheque. If the signature does not match with the bank’s record, it results in cheque bounce. To avoid such situations, the signature of the drawer must match his bank record.·        Insufficient Funds in the drawer’s bank account: The bank dishonours the cheque if there is any shortage/lack of funds in the drawer’s bank account from which the cheque has been issued. In case of insufficient funds in the bank account, the bank will stop the payment. It will also levy a penalty to both drawer and drawee. Insufficient funds are one of the main reasons for cheque bounce cases. To avoid cheque bouncing, the drawer must ensure that there is sufficient balance in his bank account before issuing any cheque.·        Overwriting on the cheque: A bank has the authority to dishonour the cheque if the drawer has scribbled or has done overwriting on the cheque. The cheque must be kept in good condition. If the bank finds that the cheque is in a bad condition or is damaged and the details mentioned in the cheque are not clearly/properly visible, then it results in cheque bounce.·        The different amount of mentioned in words and numbers sections: The bank dishonours the cheque if there is an unusual amount mentioned in the words and numbers in the cheque. The amounts specified in words must be the same as the amount mentioned under the numerical representation. This common mistake can lead to a cheque bounce. To avoid the cheque bouncing, one must write the same amount in both the sections (words and numbers). Legal Action·        The Cheque bounce is considered a serious offence that is committed by the drawer under section 138 of the Negotiable Instrument Act 1881. The first step is to issue a cheque bounce notice. The drawee issues a cheque bounce notice to the drawer within 30 days from the cheque dishonour. The notice must consist of information relating to the nature of the transaction, the amount specified, the date on which the cheque is deposited, the date on which the cheque is dishonoured, the reason behind cheque bounce and to request the payment of the amount (that was dishonoured by the bank) within 15 days from the receipt of such notice. The cheque bounce notice must also include the details of the drawer, and it should specify that the cheque was presented within the validity period; it should also specify that the cheque was not given as a loan or a gift but for discharging the debt. If the drawer makes the payment after receiving the cheque bounce notice, then there is no need to file a case against the drawer. If the legal notice is not taken seriously by the drawer, then it may give rise to legal action.·        The next step is to file a case if the drawer does not make a payment within the prescribed time. If there is no payment within 15 days by the drawer, then the drawee can file a criminal case within 30 days from the expiry of the cheque bounce notice period (15 days). The case can be filed only in the city where the drawer presented the cheque to the drawee.·        After hearing the case, the court will issue summons under section 138 of the Negotiable Instrument Act 1881. Once the summons is issued, the drawer will have to appear before the court for resolving the case.·        If the drawer is found guilty, then the penal provision mentioned under section 138 of the Negotiable Instrument Act 1881will be applied by the Court. ConclusionIn India, the Cheque bounce is considered a severe offence. It is also punishable with imprisonment or a fine mentioned under section 138 of the Negotiable Instruments Act 1881. The term of imprisonment may extend up to two years, and the fine may extend to twice the amount of the cheque drawn or both. In case if the cheque is drawn in favour of a charitable trust or as an application amount of shares, then it is exempted from the cheque bounce notice.Section 143A of the Negotiable Instruments Act 1881 states the provision relating to the Interim compensation to the drawee for the inconvenience that has been caused due to the cheque dishonour. Hence, cheque bounce is one of the common problems which is still prevalent in India. It is highly advisable to appoint a professional to draft a cheque bounce notice, or legal consequences may be attracted.The author of this blog/Article is Kishan Dutt Kalaskar, a Retired Judge and practising advocate  having an experience of 35+ years in handling different legal matters. He has prepared and got published Head Notes for more than 10,000 Judgments of the Supreme Court and High Courts in different Law Journals. From his experience he wants to share this beneficial information for the individuals having any issues with respect to their related matters .Author :Kishan Dutt KalaskarAdvocate (Retired Judge)[email protected]: 9686971935

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Kishan Dutt Kalaskar Retired Judge

1 week ago

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Rent Deference During the Pandemic

Rent Deference During the PandemicThe Coronavirus pandemic has prompted the nation to its most jarring standstill in a long time, and most governments and companies are still figuring out different ways to deal with the sudden halt of global supply chains. The lockdown has slowed down markets, factory operations and several businesses, affecting employment and source of income of many.Rental agreementsRental agreements in India are the most common types of agreements as India being one of the most populated countries, does not have enough resources and utilities per capita. People here work by renting places, and most of the outstation employees, workers and students who come to work and study also prefer to stay in a rented flat. It is important and always advisable that property-related deals shall be secured through legally binding agreements on the parties involved. It does not matter that whether you are an owner who is looking out to rent his property or a tenant who is looking for a property on rent, the important thing is that both the parties involved shall make use of a valid rent agreement format inclusive of all the clauses that shall be beneficial to both the parties and at its best shall protect the interest of both the parties. The agreement should work as a reference document for the parties involved. The rent agreement should be made keeping in mind all the legalities and legislation so that it is an error-free agreement and can be presented as collaborative evidence in the scenario when a dispute arises among the parties. These agreements are simple contracts which are legally enforceable in the court of law and is therefore made under the Indian Contracts Act, 1872. Any rental agreement which is made in keeping the mind, the essentials of a valid contract, is considered as a valid rental agreement.Rental agreements are right now the centre of attraction, as its position in the time of Covid-19 is highly unstable. There are circumstances, under which, an individual is not using a place, but is still liable to pay the rent as per the agreements. Though there have been schemes and offers by the Indian government, still the relaxation policy for such agreements is unclear. Government Policies on Economic Relief to Affected PartiesA majority of the Indian middle class lives in rented accommodation, and so do many migrants, students, out of station employees etc. and for all of them, nothaving enough savings left to meet their utilities and needs is a stark and immediate reality. In that light, the central government, along with a few state governments, that have cities with sizeable migrant, and floating populations have put in place regulations to help the middle class in need of financial respite. This paper talks about one specific aspect of the measures governments have taken to aid people financially; rent control. Since rent is a purely a contractual obligation between parties to the agreement, it is rarely infringed upon.In understanding the provisions of rent deference, it is essentialfirst to understand the importance of the Force Majeure Clause. A Force Majeure Event can be understood as an extraordinary event or a circumstance beyond human control, which frees both the parties from contractual obligations, when prevented by such an event, from fulfilling their obligations under the contract. Force Majeure Clause is a standard clause which is invariably incorporated in every agreement. It also entitles legally to suspend and or not to perform an undertaking by a party. Unfortunately, most of the Force Majeure clauses in already concluded agreements do not have a pandemic like event incorporated in it. An event in order to be stated to be a Force Majeure event must contain,among other things, the following: ·       directly or by implication be an event which is beyond the reasonable control of any of the parties; and·       must affect the ability to perform by any of the parties. The central government and the respective state governments have drafted these orders and notifications, relaxing the rent payment requirements under their jurisdiction. It needs to be kept in mind that not all states have taken measures in this vein since no other form of financial relief except loan payment has been mandated in the act. Rent DeferenceThe central government in consonance with their policies for migrant labourers and workers stranded has mandated that no landlord shall collect rent for the next few months due to the pandemic. Other measures, including arranging special trains for transit have been arranged but for the sake of this paper, the notification dated 29th March is the sole focus since it relaxes rent collection obligations and places the same under the purview of Sec, 57 of the Disaster Management Act, mandating a year of imprisonment or fine. Around the same time, the state governments of Karnataka and NCT Delhi have announced a similar measure, with the notable difference being the scope of application of the notification. In both these states, the notification extends protection to all tenants and halts payment of rent for atleast one month in Delhi and a similar length of time in Karnataka. These notifications do not signify whether they will be deferring the payments, or requiring landlords to forgo the rent for the one-month period commencing on the day of the issuance of the notification. This lack of clarity be as it may, the NCT Delhi government has, through an advisory announced that they would be providing assistance to those residents that are unable to meet their rent obligations. While there is no official notification signifying the same, it can be assumed that the same will be carried out as a local level scheme. While the Delhi and central government notifications have made provisions for action in the event of a violation of the same, the Maharashtra government notification, which wasn’t properly available on the website, and whose only public domain copy was a twitter post, where a Marathi language copy of the order was found, makes no such mention. This notification is more explicit about the aim, where the time period of non-recovery is three months, the notification clearly states that the scheme merely provides for deferment of rent payment, rather than forgiveness; allowing landlords to recover three months of rent at the end of the notification period.These measures have no bearing on the rental contracts and do not derail the status of sub-letters, most of that is to be extrapolated from the barebones construction of the notification. In sum, these notifications apply to all landlords that, at the time of publication are letting out a property in rent and to the best of my knowledge (except for Maharashtra where it is specified) defer the payment of rent. There are other ways through which the rent is reduced or waived off in these hard times. One of the ways is by directly convincing the owner of the property for some concession in the monthly payments of the rent till the nationwide lockdown is over. This is an unofficial method, and it entirely depends upon the decision of the owner whether he wants to give the concession to the tenant or not. There yet no official notice from the government which allows concession to such agreements. It is vital to note that such arrangements are being used by the students, outstation employees, etc. Also, such policies only apply to those agreements that have been executed before the nationwide lockdown, that is, before 25th march.The parties may execute an Addendum with the help of a legal entity or try to negotiate and put in writing and execute the Addendum. The strict requirement of compulsory registration of such pandemic time Addendums or novation of contracts, during these hard times, must be dispensed with by the governments so that there is no unnecessary hassle. Changes in legal System post covid-19Once the lockdown is over, and things become normal, one of the most prominent change, that the legal system will witness shall be the making of the legal enforceable agreements. People will not consider the importance of making a contract and will execute such contracts with utmost diligence. The clauses like “force majeure” and “doctrine of frustration” will be considered essential, and would be taken into consideration in future contracts. A “force majeure” clause when present in a contract, gives the opportunity to not perform legal obligations under some circumstances. Such scenarios could be when an activity becomes impossible to perform. If a rental agreement, contains this clause, there are high possibilities that the rent is waived or reduced of the tenant, as due to the lockdown staying in the rented flats have become an impossible activity. However, such clauses are not added in the rental agreements. Therefore, the layman will make sure that such a clause is given a place in the agreement.The covid-19 lockdown has also made people aware about the clause of “doctrine of frustration”. This clause frustrates the tenancy even when either party involved in the agreement is not at fault, and the legal obligations, become impossible to fulfil due to the unforeseeable circumstances. Tenancy, as the main element of the contract, will terminate automatically, when a frustrating event occurs that is one which is unforeseeable and unexpected or beyond the control of the parties. Section 56 of the Indian Contract Act, 1872 deals with “doctrine of frustration”. Here again, the important point is the presence of such a clause in the valid rental agreement. Services of trained mediators and conciliators and organizations that provide additional dispute resolution may be used by the parties, in order to conclude issue rising due to these rental agreements in the time of the lockdown.Therefore, if we talk about the changes in the legal system, drafting of the rental contracts would see a new world with much more important clauses.ConclusionPost Covid-19 there are significant changes that the country would witness. Similarly, the rental agreements will have to go through their own changes. The agreements would amend not only with the addition of newer clauses but also the way through which the rents are paid. The rent in the future might be paid through instalments etc. However, it is important to understand that the basic structure of a rental agreement would not change. It might go under some amendments, but its validity and the way they are made shall remain the same. It is advisable that once the things become normal, execution of such agreements shall be only made with the help of an experienced legal person to reduce such ambiguity in the future outcomes of the agreement. The author of this blog/Article is Kishan Dutt Kalaskar, a Retired Judge and practising advocate  having an experience of 35+ years in handling different legal matters. He has prepared and got published Head Notes for more than 10,000 Judgments of the Supreme Court and High Courts in different Law Journals. From his experience he wants to share this beneficial information for the individuals having any issues with respect to their related matters .Author :Kishan Dutt KalaskarAdvocate (Retired Judge)[email protected]: 9686971935

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Kishan Dutt Kalaskar Retired Judge

3 weeks ago

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