Signing a cheque as a guarantor may seem harmless – perhaps you thought you’were just providing further security for a borrower’s loan. Problems arise when that borrower defaults, your lender deposits the cheque, and you receive a Section 138 notice. It can leave a guarantor personally exposed in a legal sense if a cheque bounces. But liability isn’t guaranteed in every situation. At LEGAL365, we look at the guarantee, cheque, outstanding loan amount and statutory notice before recommending whether payment is required, a settlement can be negotiated or we should represent you. Loan defaults can arise against relatives, business partners or directors who have signed as a guarantor. The dishonour of cheque puts drawer at risk of facing legal action, financial stress and reputational damage. Proceedings may be initiated in Delhi NCR, Mumbai, Jaipur, Bengaluru and other jurisdictions depending on applicable statute. LEGAL365 can review documents early on so a guarantor doesn't have to respond based on incomplete information. The liability of the surety u/s 128 of Indian Contract Act, 18 72 is co-extensive with that of the principal debtor in absence of contract to the contrary. Dishonour of personal cheque issued by a guarantor towards an enforceable loan liability can invite Section 138 NI Act, 18 81 liability. In case a guarantor has not drawn/n signed the cheque, personal prosecution under Section 138 generally cannot lie merely on the basis of his being a guarantor. LEGAL365 verifies this fact upfront. Sections 138 and 139 Of NI Act pertain to dishonour of cheque and presumption as to liability. Section 142 Of NI Act lays down provisions relating to Complaint and Limitation. Section 147 Of NI Act talks about compoundable Lawfully. The legal amount outstanding on the date of presentation continues to be relevant. LEGAL365 may also analyse entries of repayment, Terms of settlement, Discharge of guarantee, Notice served and if the cheque amount corresponds to the liability claimed. Seek legal advice as soon as possible if you receive a demand notice, summons from court or a settlement offer. Legal advice can also be beneficial where the loan was partially repaid, restructured, assigned or settled. LEGAL365 can determine if the amount they claim you owe is justified by the loan history and if you need representation now. LEGAL365 helps you get advice on guarantor cheque bounce case. We help you review the notice, evaluate your complaint, documentation, settlement and litigation in court. After reviewing the cheque, guarantee and loan account Ms.BK Singh will suggest the way forward specifically suited for your case. You can also reach out to Cheque Bounce Lawyer for advice anywhere in Delhi NCR or else where in India. Ans. Yes. Such complaint could be maintainable if the guarantor issued the cheque against a legally enforceable loan liability and all requisites of Section 138 are met. Ans. No. It is not mandatory. Liability of a guarantor could be co-extensive with liability of borrower depending upon the terms of guarantee and applicable law. Ans. No. Court could look into the existence of enforceable liability at the time of presentment of cheque notwithstanding the description of cheque at the time of issuance. Ans. No. Liability under Section 138 is primarily of the drawer of cheque. Being a guarantor is not a substitute of statutory condition as to who drew the cheque. Ans. Amount paid back as part-payment would get adjusted against the amount legally payable. Physical cheque, endorsements, account statement and cheque amount should be cross checked before replying. Ans. Yes. Offence under Section 138 is compoundable. But any settlement/payment should be evidenced out clearing terms of payment, obligation to close the case and treatment of outstanding loan liability. Ans. Respondent has chosen not to respond to the notice which would enable the complainant to file a complaint after the expiry of statutory period of 15 days. You should consult a lawyer without any delay. Ans. It would depend upon the language used in compromise, status of payment and terms of guarantee. Compromise with borrower does not necessary lead to release of guarantor. All the documents need to be reviewed carefully. Ans. No. Specific court would have jurisdiction to entertain the complaint depending upon how and where the cheque was presented for payment as per Section 142(2) read with Section 198. Bank record sheets and complaint draft needs to be reviewed. Ans. FREE DOCUMENT-BASED OPINION on your liability, Notice requirements, Settle ability, Counsel fees without any guarantee of results by LEGAL365 and Adv. BK Singh. Guarantor cannot ignore bounced cheque notice because loan was taken by someone else. He can be held liable only after considering the terms of guarantee, amount left to pay, reason for which cheque was issued and Section 138 NI act conditions. Reviewing the documents at initial stage itself can save you from such expensive errors. If you need assistance for advice specific to your case, cheque notice evaluation, settlement help or defending you in court then please consult the matter with Advocate BK Singh on LEGAL365.Cheque Bounce by Guarantor in Loan Account: Liability and Defence
Why Does Guarantor Cheque Bounce Matter in India?
What Are the Quick Facts?
When Can a Guarantor Be Liable for a Bounced Cheque?
Which Laws Govern a Guarantor Cheque Bounce Case?
When Should You Consult a Cheque Bounce Lawyer?
How Can LEGAL365 and Advocate BK Singh Help?
1. Can a bank initiate cheque bounce proceedings against a guarantor?
2. Should bank have taken action against borrower first?
3. Is my security cheque immune from section 138?
4. Can the bank prosecute me as a guarantor when I have not signed the cheque?
5. Loan was partially repaid, how to reply?
6. What if the matter is settled after filing of complaint?
7. Guarantor has received legal notice and not responding. What to do?
8. Can a compromise with borrower work for guarantor also?
9. Can I file complaint in any court?
10. Why Legal365 and Adv BK Singh?
Conclusion
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