An Economic Analysis of Check Bounce Cases : In India Check Bounce | Page 7

only if the amount that is check bound is at least more than Rs 1,00,000/- otherwise the same reme-
dy won’t make sense. On the other hand it would be incentivising for the wrongdoer or Defendant
to do check bounce in amounts less than Rs 1,00,000/- as the plaintiff would be more inclined for
settlement rather than court proceedings.
Now we need to look at the costs the defendant has to pay so as to find out out of both the parties,
which of the party would be more beneficial in the end.
Hence we would look at the externalities from the perspective of the defendant which includes:
SR NO. EXTERNALITY COSTS (INR)
1 Cost of Bail 25,000
2 Cost of Appearance 4000 X 7
3 Cost of Argument 7000
4 Fee of Reply 5000
5 Notary Attestation 500
6 Typing Per Page 20 x 10
7 Punishment 2,00,000
From the above externalities we find that, accused/defendant has to pay Rs 42,000(Approximately),
and if found guilty, would have to pay an extra Rs 2,00,000/- hence it is incentivising for the plain-
tiff to go to court for remedy only if he is fully assured that he’ll win the case, if the same is for
sure, he would get Rs 2,00,000/- as compensation, hence it would be beneficial for the Plaintiff to
approach the court even if the same check bounce is for an amount less than Rs 1,00,000/-.
BASIC THEORY OF LITIGATION
A plaintiff’s reasoning from an economic perspective, if he wants to litigate or not depends upon:
1. Private Benefits from Pursuing
2. Private costs of Pursuit
From the above factors one can argue that, a person would go for trial if :
Expected Gross return from Litigation > Cost of Bringing the case to Trial
(x)
(Cp)
The value of the suit and probability to win it would determine one’s Expected Gross return from
Litigation (x).