An Economic Analysis of Check Bounce Cases : In India Check Bounce

INTRODUCTION
Cheque is a negotiable instrument. Normally, cheques are issued either for the reason of statutory
requirement or for the reason of securing proof of payment. Crossed and account payee cheques are
not negotiable by any person other than the payee. It has to be deposited into his bank account. In
legal parlance, author of the cheque is called ‘drawer’, the person in whose favour it is drawn is
called ‘payee’ and the bank who is directed to pay the amount is called ‘drawee’. It is always safe
to issue crossed “Account Payee Only” cheques in order to avoid its misuse. Blank cheques are not
safe. It is better to date the cheque invariably. A cheque is valid for payment only for six months
from the date mentioned in the cheque. After the period of six months, such a cheque is called
‘stale cheque’ 1 .
A check gets to be distinctly due for installment on the date specified on it. Before issuing a check
creator of the check ought to guarantee that he has adequate supports in his record. Keeping in mind
that, it would ricochet with comments 'lacking assets'. Bobbing in like manner speech is alluded to
disrespect of checks.
Bobbing of a ball is a fun yet skipping of a check is a criminal offense. The Negotiable Instruments
Act, 1881 is appropriate for the instances of shame of check. This Act has been changed ordinarily
since 1881 and I will talk about the arrangements of this Act the way things are today. Instantly
upon shame the drawee bank issues a 'Check Return Memo' to the broker of the payee refering to
the purpose behind non-installment. Thusly the payee's investor should handover the disrespected
check and the reminder to the payee.
The payee has an alternative open to him either to re-show the check if and when he supposes the
check could be respected however inside six months from the date of the check or continue lawfully
to indict the drawer. The payee may arraign the drawer for shame of check just if the sum said in the
check is towards release of an obligation or whatever other lawful risk of the drawee towards payee.
Insignificant issuance of a check say for the reasons for blessing, or towards loaning an advance or
for unlawful purposes would not add up to lawful obligation and the drawer can't be indicted in
such cases. In the event that he chooses to continue legitimately, then the drawer ought to be given a
1
Jehangir Sorabje Khergamvala, O. P. Faizi, Khergamvala on the Negotiable Instruments Act, LexisNexis Butterworths
India, 2008, p 23