Cheque Bounce Civil Liability - Recovery of Money Through Civil Suit

Understanding Civil Liability for Cheque Bounce

In addition to the criminal liability under Section 138 of the Negotiable Instruments Act, a cheque bounce also gives rise to civil liability. The drawer of the dishonoured cheque is liable to pay the cheque amount to the payee, along with interest and costs. The payee can file a civil suit for recovery of the amount, independent of the criminal proceedings. The civil suit is based on the principle that the drawer has failed to honour the commitment made by issuing the cheque, and the payee is entitled to recover the amount.

The civil liability for cheque bounce is based on the law of contracts and the law of negotiable instruments. The cheque is a negotiable instrument, and the drawer is liable to pay the amount to the holder in due course. The civil suit for recovery is a straightforward legal proceeding, and the payee can claim the cheque amount along with interest from the date of the cheque or the date of the dishonour. The civil suit can be filed in the civil court having jurisdiction over the matter. The limitation period for filing a civil suit for recovery based on a cheque is three years from the date of the cheque or the date of the dishonour. Vidhi Legal Services assists clients in filing civil suits for recovery of cheque amounts.

Difference Between Civil and Criminal Remedies

The civil and criminal remedies for cheque bounce are distinct and independent. The criminal remedy under Section 138 is aimed at punishing the drawer for the offence of dishonour, while the civil remedy is aimed at recovering the amount due. The criminal proceedings can result in imprisonment and fine, while the civil proceedings can result in a decree for payment of the amount. The criminal proceedings are governed by the Code of Criminal Procedure, while the civil proceedings are governed by the Code of Civil Procedure, 1908.

The standard of proof in criminal proceedings is beyond a reasonable doubt, while the standard of proof in civil proceedings is preponderance of probabilities. The limitation period for criminal proceedings is shorter (one month from the expiry of the notice period), while the limitation period for civil proceedings is longer (three years from the date of the cheque). The criminal proceedings are faster, while the civil proceedings can take longer. The payee can pursue both remedies simultaneously, as they are not mutually exclusive. However, the payee cannot recover the amount twice, and the amount recovered in one proceeding will be adjusted against the other. Vidhi Legal Services advises clients on the strategic choice between civil and criminal remedies and helps them pursue both remedies effectively.

Filing a Civil Suit for Recovery

The process of filing a civil suit for recovery of the cheque amount involves several steps. The payee must first draft a plaint stating the facts of the case, the amount claimed, and the grounds for the claim. The plaint should be accompanied by the relevant documents, including the original cheque, the bank return memo, and the legal notice. The plaint should be filed before the civil court having jurisdiction over the matter. The jurisdiction is determined by the amount of the claim and the location of the parties.

Once the plaint is filed, the court will issue summons to the defendant (the drawer). The defendant may file a written statement opposing the claim. The court will then proceed with the trial, which includes the examination of witnesses and the production of evidence. The court may also refer the case to mediation or settlement. After the trial, the court will deliver its judgment and decree. If the decree is in favour of the payee, the payee can execute the decree to recover the amount. The payee can also seek attachment of the defendant's property before judgment if there is a risk of the defendant disposing of the assets. Vidhi Legal Services handles the entire civil suit process, from drafting the plaint to executing the decree.

Interest and Costs in Civil Suits

In a civil suit for recovery based on a cheque bounce, the payee can claim interest on the cheque amount. The interest can be claimed from the date of the cheque or the date of the dishonour until the date of payment. The rate of interest is determined by the court based on the facts and circumstances of the case. The court may award interest at the contractual rate, if any, or at the rate prescribed under the Interest Act, 1978. The court may also award interest at the rate of 18% per annum or such other rate as the court deems fit.

The payee can also claim the costs of the proceedings, including the court fee, lawyer's fees, and other expenses. The court may award costs to the successful party, and the amount of costs is determined by the court. The payee should keep records of all expenses incurred in the proceedings to claim costs. The court may also award punitive damages in cases where the drawer has acted with mala fide intent. The total amount recoverable may include the cheque amount, interest, costs, and damages. Vidhi Legal Services advises clients on the calculation of interest and costs and ensures that all claims are properly included in the plaint.

Execution of Decree and Recovery

Obtaining a decree in a civil suit is only the first step; the real challenge is executing the decree and recovering the amount. If the defendant fails to comply with the decree voluntarily, the payee can file an execution petition before the court. The court can then take coercive measures to recover the amount, including the attachment and sale of the defendant's property, the garnishment of bank accounts, and the arrest of the defendant. The court can also appoint a receiver to manage the defendant's property and pay the amount to the payee.

The execution of the decree can be a lengthy process, and the payee may need to provide information about the defendant's assets to the court. The payee may also need to conduct asset tracing to identify the defendant's assets. The court may also issue a warrant for the arrest of the defendant if the defendant is wilfully avoiding payment. The payee should be patient and persistent in pursuing the execution of the decree. In some cases, the payee may also consider filing a criminal complaint under Section 138 to put pressure on the drawer to pay. Vidhi Legal Services assists clients in the execution of decrees and takes all necessary steps to recover the amount.

Frequently Asked Questions