Cheque Bounce Case in India: Legal Process & Remedies

 

🧾 Cheque Bounce Case in India: Legal Process, Punishment & Remedies

📘 Introduction

A cheque bounce, also known as cheque dishonour, occurs when a bank fails to honour a cheque due to insufficient funds, account closure, or mismatch of signature. It is a criminal offence under Section 138 of the Negotiable Instruments Act, 1881, and is one of the most common legal issues in Indian courts today. This blog offers a comprehensive guide to understanding the legal process, punishment, and remedies in cheque bounce cases.

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🧾 What is Cheque Bounce?

Cheque bounce refers to the rejection or dishonour of a cheque by the drawee bank. This may happen due to:

• Insufficient funds

• Account closed

• Signature mismatch

• Overwriting on the cheque

• Payment stopped by the drawer

When a cheque bounces due to any of these reasons, especially "insufficient funds", it attracts criminal liability under Section 138.

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📜 Section 138 of the Negotiable Instruments Act, 1881

⚖️ Essentials of Section 138:

To initiate legal action under this section, the following conditions must be fulfilled:

1. The cheque must be drawn for the discharge of a legally enforceable debt or liability.

2. The cheque must be presented within 3 months from the date it is drawn.

3. The bank must return the cheque due to insufficient funds or any other reason.

4. A demand notice must be issued to the drawer within 30 days from the date of return memo.

5. The drawer must fail to pay the amount within 15 days from the receipt of the notice.

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📑 Legal Procedure for Filing a Cheque Bounce Case

Step 1: Cheque Presentation

The cheque must be presented within 3 months of its issue date.

Step 2: Demand Notice

If the cheque is dishonoured, a legal notice must be sent to the drawer within 30 days, demanding payment.

Step 3: Waiting Period

The drawer is given 15 days to make the payment. If they fail, a complaint can be filed.

Step 4: Filing the Complaint

File a criminal complaint in the Magistrate's court within 30 days after the 15-day period ends.

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🧾 Format of Legal Notice (Brief Overview)

To,
[Drawer’s Name]
[Address]

Subject: Legal Notice under Section 138 of the Negotiable Instruments Act

Dear Sir/Madam,

This is to inform you that cheque number [XYZ] dated [DD/MM/YYYY] issued by you in favour
of my client for Rs. [Amount] has been dishonoured due to [reason].

You are hereby called upon to pay the amount within 15 days of this notice,
failing which legal proceedings under Section 138 will be initiated.

Sincerely,
[Lawyer's Name]

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👩‍⚖️ Jurisdiction to File Complaint

The complaint can be filed where:

• The cheque was presented (i.e., bank branch of payee)

• The cheque was returned unpaid

• The notice was issued or served

This was clarified in Dashrath Rupsingh Rathod v. State of Maharashtra (2014) and later modified by the Negotiable Instruments (Amendment) Act, 2018.

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⚖️ Punishment for Cheque Bounce

Under Section 138, the punishment includes:

• Imprisonment up to 2 years

• Fine up to double the cheque amount

• Or both

The court may also order compensation under Section 357 of CrPC.

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🧭 Defence Available to the Accused

The accused can defend the case by proving:

• There was no legally enforceable debt

• The cheque was issued as security

• The notice was not received

• The complaint was filed beyond limitation

Presumption under Section 139 NI Act is in favour of the holder, and the burden is on the accused to rebut it.

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🏛️ Landmark Judgments

📌 Krishna Janardhan Bhat v. Dattatraya Hegde (2008)

The Supreme Court ruled that the accused can rebut the presumption under Section 139 with evidence or preponderance of probability.

📌 Dashrath Rupsingh Rathod v. State of Maharashtra (2014)

Initially limited jurisdiction to the drawer’s bank location, but the 2018 amendment restored filing where the cheque was presented.

📌 M/s Meters and Instruments Pvt. Ltd. v. Kanchan Mehta (2017)

Allowed compounding of offence and promoted alternative dispute resolution in cheque bounce matters.

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🛡️ Remedies Available to the Payee

1. Criminal Complaint under Section 138

2. Civil Suit for Recovery

   • Independent of criminal proceedings

3. Summary Suit under Order 37 CPC

   • Quick remedy in civil court

4. Filing a Complaint under Consumer Protection Act (if cheque was issued in trade or services context)

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📊 Statistics on Cheque Bounce Cases

As per National Judicial Data Grid:

• Over 30 lakh cheque bounce cases are pending in various Indian courts.

• These cases constitute 20-25% of total pending criminal cases in magistrate courts.

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🔁 Compounding of Offence (Section 147 of NI Act)

Cheque bounce is a compoundable offence, meaning the parties can settle and withdraw the complaint at any stage before conviction.

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💡 Practical Tips for Avoiding Cheque Bounce Trouble

• Maintain sufficient balance in your account.

• Avoid issuing post-dated cheques unless absolutely necessary.

• Keep a record of all cheques issued and received.

• If you receive a cheque, present it within the validity period.

• Use registered post or email for serving legal notices.

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📚 Legal Drafts for Download (Optional)

Would you like downloadable legal drafts like:

• Cheque Bounce Legal Notice (Editable Format)

• Cheque Bounce Criminal Complaint Format

Let me know and I’ll add them!

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📌 FAQs on Cheque Bounce Cases

Q1. Is cheque bounce a criminal offence in India?
Yes, under Section 138 of the Negotiable Instruments Act.

Q2. Can a case be filed after 15 days of the notice?
Yes, but it must be within 30 days from the expiry of the 15-day payment window.

Q3. Can a complaint be filed without sending a legal notice?
No. Legal notice is mandatory.

Q4. Can the accused be arrested?
No automatic arrest, but non-bailable warrants can be issued if the accused fails to appear.

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🔍 Sources & References

1. Negotiable Instruments Act, 1881
   https://legislative.gov.in

2. Dashrath Rupsingh Rathod v. State of Maharashtra (2014)
   SCC Online

3. Supreme Court Guidelines on Cheque Bounce Cases
   indiankanoon.org

4. National Judicial Data Grid (NJDG)
   https://njdg.ecourts.gov.in

5. Bar Council of India Legal Articles
   http://www.barcouncilofindia.org