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Dec 124 min read

What Are The Legal Steps To File A Cheque Bounce Case?

Section 138 Of The Negotiable Instruments Act, 1881, Governs Cheque Bounce Instances In India. The Problem Arises When The Cheque Drawn By The Drawer Is Returned Unpaid By The Bank, Either For Insufficient Funds Or For Any Other Reason.

Cheque Bounce: About


The Situation Concerning The Cheque Bounce Arises When A Cheque Is Not Processed Due To One Of The Following Reasons:

  • The Drawer's Account Balance Is Not Sufficient.

  • There Is A Mismatch Between The Signatures.

  • Account Closure Or Payment Halt By The Drawer.


Not Only Is A Bounced Cheque A Matter Of Monetary Loss, But Also A Blemish On The Image Of The Issuer. This Is Made A Criminal Offense Via Section 138 Of The Negotiable Instruments Act And Thus Ends Up Imposing Stiff Penalties For Ensuring That The Payee's Interests Are Protected.


Legal Steps To File A Cheque Bounce Case

Receipt Of Cheque Return Memo

  • Bank Issue Cheque Return Memo When Cheque Dishonoured With The Statement Of The Reason For The Bounce. This Memo Is Very Important As This Acts As Evidence In A Legal Dispute.


Issuance Of A Legal Notice

The Payee Must Give The Drawer A Legal Notice As Soon As They Get The Return Memo. This Notice Serves As Both A Formal Demand For Payment And A Notification.


Time Limit: After Receiving The Cheque Return Memo, The Notice Has To Be Mailed Within 30 Days.  


Content: 

  • Information About The Rejected Cheque, Including The Date, Amount, And Cheque Number.  

  • The Reason For Dishonour As Stated By The Bank.

  • Within 15 Days After Receiving This Notice, The Cheque Amount Must Be Paid. 

  • Warning Under Section 138 Of Legal Action In Case Of Non-Compliance.


Wait For Reply

  • Fifteen Days Is Given To The Drawer To Respond To The Legal Notice And Make The Payment. Failure To Make Payment Within That Time Gives The Payee The Green Light To File A Case.


Lodging The Complaint

If The Drawer Has Not Paid Within The Stipulated Time, The Payee Can File A Complaint Under Section 138 Criminally. The Steps Are As Follows:


Drafting The Complaint: 

The Complaint Would Include;

  • Particulars Of The Transaction

  • Copy The Cheque And Return Memo

  • Copy The Legal Notice And Proof Of Its Delivery (Postal Receipt, Acknowledgment Card, Etc.)


Jurisdiction:

  • Where Payment Bank Of The Payee Is Located.

  • Cheque Was Presented.

  • Legal Notice Was Served.


Court Fees And Documentation:

Court Fees Depend On The Amount Of The Cheque And The Rules In Respect Of The State.

Supporting Documents Are:

  • Original Dishonoured Cheque.

  • Cheque Return Memo.

  • Copy Of Legal Notice.

  • Proof Of Notice Delivery.


Submission:

  • The Complaint Should Be Submitted To The Magistrate Court.

  • The Magistrate Shall Examine The Documents, And Upon Satisfaction Will Issue Summons Against The Accused Person.


Court Proceedings In A Cheque Bounce Case

Once The Case Is Brought To The Court, These Are The Steps Involved:


Issuance Of Summons: The Summons Issued By The Court Shall Be To The Drawer (Accused) To Appear For Hearing. The Accused Must Respond To This Summons And Must Appear In Court On The Specified Date.


Pleadings And Evidence: The Complainant As Per The Court Evidence (Original Cheque, Return Memo, And Notice).

The Accused Is Given An Opportunity To Present Their Defense, Namely:

  • Intended Not To Cheat.

  • Paid Already.

  • Errors In Notice Or Lapses In Procedure.


Cross-Examination: Cross-Examination Of Both Parties By The Opposite Side Advocates. It Is This Stage When Facts And Information Tend To Fly Over The Heads.


Judgment: After Hearing Arguments From Both Parties, The Judge Makes A Ruling. The Following Would Happen If The Accused Was Found Guilty: 


  • Monetary Fine (Not Exceedingly Twice The Value Of The Cheque).

  • Imprisonment (For A Duration Of 2 Years). 

  • Both According To The Gravity Of The Offense.


Alternatives To Criminal Action In Cheque Bounce Case

Other Avenues Apart From Proceeding With The Criminal Complaint Under Section 138, Well Worth Consideration By The Payee, Are:


  • Civil Suit: Order 37 Of The Code Of Civil Procedure Allows For Filing A Suit For Recovery Of Cheque Amount Together With Damages. 

  • Insolvency Proceedings: If The Drawer Is A Business And It Is Later Determined That It Is Unable To Pay Its Debts, Insolvency Procedures Should Be Started.


Preventive Measures Regarding The Cheques


  • Check Drawer's Financial Standing Before Accepting Cheques. 

  • Avoid Using Cheques To Eliminate All Disputes. 

  • Record Each Transaction And All Communications.


Legal Formalities Need To Be Adhered To Filing A Cheque Bounce Case In Strict Timelines In India. Notably, Section 138 Of The Negotiable Instruments Act Is A Strong Weapon For The Payee Against A Defaulting Person. However, Following The Procedural Requirements And Having Expert Legal Assistance Can Increase The Chances Of Winning In Such Cases In Court.


Thus, With The Legal Framework And Prompt Action, An Individual Or Business Can Possibly Settle Wrongful Cheque Bounce Issues And Recover Rightful Dues.


One Can Talk To Lawyers From Lead India For Any Kind Of Legal Support. In India, Free Legal Advice Online Can Be Obtained At Lead India. Along With Receiving Free Legal Advice Online, One Can Also Ask Questions To The Experts Online Free Through Lead India.


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