What Happens Legally If a Corporate Cheque Issued by a Private Limited Company Bounces?
The cheque of a private limited company is a commercial liability and not just a liability to pay an amount. In case of dishonour of a cheque of a private limited company, there can be implications both legal as well as otherwise, depending upon the circumstances. It is extremely important for the owner of any business, supplier or service provider to act at the earliest after a bounced cheque, as there is a lot that can depend upon it. Which Law Applies When a Company Cheque Bounces? Cheque dishonour cases in India are primarily governed by the Negotiable Instruments Act, 1881. However, when a private limited company issues the cheque, the legal analysis becomes more detailed because the company acts through its directors, authorised signatories, and responsible officers. Under Section 138 of the Act, proceedings may arise when: ● The cheque was issued towards a legally enforceable debt or liability. ● ...