A very reputed businessman, who had established various branches of his brand in different cities across India was accused of a false cheque bounce case by a bank. The amount charged to him was huge as well. But he took the right decisions quickly without wasting time thinking about how his reputation is now harmed. He collected all the apposite documents and files and contacted a lawyer to file a legal notice within the time span of 30 days. And since it was a false allegation on him, it was not much of a task for the bank to be proven guilty.

If he would not have taken the said actions quickly and did not submit the notice on time,i.e, within 30 days of receiving the notice from the bank, a warrant might have been issued against him and he would also have had to actually pay the amount for the false cheque bounce imputation. These accusations are generally to affect the reputation of a person and bring him down or go to jail. Although it might end up being a mistake on the bank’s side or the depositor of the cheque in some cases mostly it is to bring down the prestige and position of the recipient of the cheque in the market.

If you also are incriminated by a false cheque bounce case or just want to be aware of such happenings in the real world, this blog is for you. Everything starts from a basic definition of what is a cheque and cheque bounce to what you can do (other than panicking and stressing out ) if ever you are stuck in such a situation. To under false cheque bounce, first, you must know what is a cheque, the cheque bounce, and the reasons for cheque bounce.

What is a Cheque?

A Cheque is an important part of the financial system in various countries across the world. A cheque is regarded as an important document that can be used by an individual, company, or government for transactions of various amounts. A Cheque is also termed as a negotiable document to transport money in a physical form or even to perform the inter-account transfer.

What is Cheque Bounce?

The situation of cheque bounce means that the process of depositing cheques in the bank has been unsuccessful. It might be due to several reasons:

1. When there are insufficient funds in the account of the issuer. It is therefore advised to be aware and careful while issuing a cheque to ensure that there is sufficient balance in the account of the issuer.
2. When the date mentioned on the cheque is disfigured or when the numbers are scribbled or even if the date on the cheque is 3 months old from the present date, then the bank can bounce the cheque.
3. When the signature does not match with the bank’s records.
4. When there is a difference in the amounts mentioned in numbers and words.
5. When the cheque has too many stains or marks.
6. When there is overwriting, scribbling, or correction on a cheque.

False Cheque Bounce

Many people still prefer making their payments through cheques because of various reasons like cheques allow making payments to people who do not have a bank account or few are not yet comfortable with net banking. But cheque bounce cases are rising in today’s time and the Indian courts are filled with these cases which are filed under Section 138 of the Negotiable Instruments Act,1881.

These cases are usually to extract money from someone or to harm and spoil his/ her reputation. However, some cheque bounce cases amongst these cases are false cases and are not genuine cases which targets some innocent people who then end up facing legal issues because they lack the knowledge on what should be done.

How would you deal with a False Cheque Bounce Case?

The victim in such cases need not worry much about it as it is a false accusation and generally easily proved with the valid documents that there was enough balance or fund in the bank account of the issuer which would ensure there was no cheque bounce.

Some important measures to take when a situation of false cheque bounce arises:

1. Collecting all the important documents – The wisest and smart thing to do when there is any false accusation to a person is to collect proof which will show him guilty of the charge put on him. Similarly, this case is no different, and collecting the relevant documents which would prove me innocent and the bank guilty.
2. Contact the bank and collect information regarding the – If your cheque bounces, the bank would send you a notice informing you of the same. You have to then contact them and confirm if it has really happened and if it did what are the reasons.
3. Hire a lawyer and reply to the legal notice of the bank – It is not easy to draft a legal notice and you should not take it lightly because once the notice is drafted and sent, you would not be able to change its content and have to stick to it. You would not be able to go against the statement written by you in your notice. So you must consult with a lawyer who deals with cheque bounce cases and reply to the notice about the cheque bounce case which you would have got from the check receiver. The reply should be sent within 30 days of receiving the notice. In many such cases of fraud and false accusation, the case is withdrawn once a legal notice is sent.
4. File a counter case- You are legally allowed to file a counter civil case against the person who has filed a false cheque bounce against you. You can claim compensation for the false accusation. You can also claim compensation for all the damages and expenses which you might have incurred for dealing with the fraud case with the bank. You can also file a defamation case against the false accuser.

Documents required for filing a counter case

1. Payment invoices
2. Bill generated when the payment was made
3. The bank account statement
4. Copy of the cheque issued
5. Bank draft cheque

It is always a good idea to keep 2-3 copies of each document because sometimes you might have to submit the copies to the authorities dealing with the case. The process becomes quicker and hassle-free when the documents are handy.

Section 138 in The Negotiable Instruments Act, 1881

Section 138 of the Negotiable Instruments Act 1881 provides the legal recourse to handle the situation of cheque bounce or dishonor of cheque.

This section has been very recently decriminalized. On 8 June 2020, the Ministry of Finance proposed decriminalizing various minor offenses “for improving business sentiment and unclogging court processes”, which also include Section 138 of the Negotiable Instruments Act, 1881. The main purpose of decriminalizing this section is to promote foreign investment in our country. Due to Coronavirus Disease, the economy of India has been affected badly and these steps would also help in boosting India’s economy.

But every action has its reaction and this step will lead the creditors to lose their confidence in the credibility of the cheque system.

Punishment for cheque bounce case

Section 138 of the Negotiable Instruments Act states the dishonor of cheque or cheque bounce is a criminal offense and the punishment includes imprisonment up to two years or monetary penalty or with both.

If the court is convinced that you are guilty and the case of the bank has no merit then it will provide you with all the charges.

Conclusion

False Cheque bounce cases along with other frauds cases are rising each passing day. It is very important to be aware of the different types of fraud and especially fraud related to monetary aspects like cheques because money is obviously involved in any job and work. Going by the saying ‘Precaution is better than cure, it is always good to have knowledge about these frauds so that you can easily prevent that from happening or in some cases when it is not really in the hands of the person to prevent it, you at least know the cure to it. Having knowledge makes you capable of helping out someone stuck in that situation.

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What is the commercial agreement?

Commercial: Commercial transactions are some sort of dealing where payment for defined goods or services are involved. A different form of commercial transaction involving transactions between business to business or business to consumer or business to the government is a few examples of the same.

Agreement: As per section 2(E) of the Indian Contract Act, 1872 “every promise and every set of promises, forming the consideration for each other is an agreement.”

Commercial Agreement: The negotiations between parties with regards to the commercial transaction of goods or services which are listed in agreements in writing.

The agreements define the duties and responsibilities of all parties and what they will get in return from the agreement. A commercial agreement generally contains the following clause:

• Name of parties.
• Terms, purpose, and duration of the agreement.
• The commercial benefit of all parties.
• Duties and Responsibilities of each party to the agreement.
• Termination of the agreement clause.
• Signature of all parties to give consent to all clauses of the agreement.

Process of Making of Commercial Agreement

Each agreement is different from the other and it should meet all the requirements of parties involved in the transaction. All transactions start from negotiations between all parties in the transaction to enter into a contract after negotiations are completed then a document is drafted generally on a stamp paper and registered with a notary. Process of commercial agreement is:

Negotiation: Negotiations are starting point of any commercial relationship between parties and it is done so that parties in the agreement could do their research well on the subject matter of the agreement and define their position with the respect to clauses of the agreement clearly during negotiations.

Drafting: Drafting of an agreement is done with an utmost understanding of the law of contract actions and other important laws related to product or services or payment and facts should be stated precisely and carefully. Each and every statement should be clearly defined in the agreement. Definite words and sentences should be used and non-commitment language must be avoided at all costs.

Stamp Duty: Instruments such as agreements are chargeable to stamp duty. However, there are a few types of commercial agreements which are exempted from stamp duty by the state laws. The agreement which is executed in India must be stamped before or at the time of their execution. An instrument that is not duly stamped cannot be accepted as evidence under the evidence act and cannot be accepted in the courts in India.

Registration: It is recommended to record the contents of agreement with a registration officer as it gives proof of originality of documents, a registered document is legally valid under the Indian Registration Act. But not all documents require registration under Indian Laws.

Types of Commercial Agreement

When your business starts to make agreements with other businesses for the supply or sale of goods and services, then a proper commercial contract to record these agreements and protect themselves in case of a dispute between the parties to contract. There are so many different kinds of commercial contracts, and some are highlighted below:

Purchase and Sale Agreements: Purchase and sale agreements are one of the most basic and popular commercial agreements. These contracts cover one party’s agreement to buy goods from the other parties to the transaction. In this type of contract, it is important to specify the quantities or specify the goods that are needed, the amount of payment and manner of the payment, time and date of delivery, what happens if the goods are not available, and what happens if other disputes arise between the parties.

Services Agreements: One other type of commercial contract is the services contract. In a services contact, someone agrees to provide services for someone else. For example, a dry cleaning service could agree to come in thrice a month for cleaning your business’s premises. The contract should specifically detail services that are to be provided and how they will be provided by them. It should account for any I basic requirements, the liability of the parties to each other damage caused by the services provider or researcher, and more.

Distribution Agreements: Distribution agreements cover how goods will get from the production department to the ultimate consumers. Some organizations specialize in the distribution of goods, which may include transportation, logistics, and even advertisement of the goods. A good distribution agreement will specify which duties of the distributor and which the production company will retain.

Production Agreements: Finally, production of goods or services are agreements that arise when one company needs a detailed part of good made, and so it’s an agreement with another organization that will produce the part. It’s the same as a purchase and sale agreement, production agreements should be made with a clear intention on how much of the part is needed and what to do if something goes wrong.

 Benefits of Commercial Contracts

Proof of details

This is definitely one of the reasons why a written contract is essential for your organization or any type of agreement –it can legally serve as evidence for the proof of details on whatever parties have agreed in the agreement. It provides the ultimate understanding of the agreement between both the parties to the contract or payment liability that one party needs to comply with hired employees. All these things should be stated in the written agreement as legal evidence.

Prevent misunderstanding from arising

A written commercial agreement is usually documented for sensitivity between parties entering into a business transaction. The main objective of this agreement is to give all parties to the agreement a chance read and have a clearer understanding of the terms or conditions of the transaction, including the expectations and liabilities of each party and what they have come to terms with after negotiation.

Provide’s security

In any commercial transaction, an agreement can provide security and confidence to each party to the agreement involved in the transaction. For example, an employment contract between the employer and an employee with regards to their duties and responsibilities, payment, and overall relationship. An employer is legally responsible for complying strictly with the employee’s salary under the industrial action and other benefits stated by Indian laws, whereas the employee has to perform all his or her duties assigned duties by the employer as mentioned in the job description.

Guaranteed confidentiality

One of the most important benefits of having a written agreement in commercial transactions is to have a confidentiality clause to protect business secrets and other parties have to agree to the confidentiality and non-disclosure provisions. As part of the agreement, all parties to the contract are legally bound to hold in secrecy as mentioned by the other parties and the information exchanged between the parties, and the party that violates this clause under the agreement would be held liable under the agreement.

Serve as a record of business transaction

A written agreement is used as a record of the business transaction between the parties to the contract and what they have agreed on in the agreement.

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