Understanding Cheque Bounce Cases in India: Procedure

In today’s fast-paced financial landscape, cheques are still widely used for transactions despite the rise of digital payments. However, when a cheque is dishonoured—commonly referred to as a cheque bounce—it can lead to legal consequences for the issuer and serious inconveniences for the receiver. In India, cheque bounce cases are governed by Section 138 of the Negotiable Instruments Act, 1881. This blog will help you understand the step-by-step procedure to handle a cheque bounce case, legal remedies available, and preventive measures.

🔍 What Is a Cheque Bounce?
A cheque bounce occurs when a cheque presented to the bank cannot be processed due to insufficient funds, mismatched signatures, or other discrepancies. While it may sound like a small issue, cheque bounce is treated as a criminal offense in India to ensure the reliability of banking transactions.

📝 Common Reasons for Cheque Bounce
Insufficient funds in the issuer’s account.
Signature mismatch or differences in handwriting.
Expired or stale cheque (cheques are valid for three months from the date of issue).
Overwriting/alteration on the cheque.
Stop payment instructions from the issuer.
Account closure or freezing of the account.

⚖️ Legal Framework: Section 138 of the Negotiable Instruments Act, 1881
Section 138 lays down the legal recourse available to the payee (the person to whom the cheque was issued) in the event of cheque dishonour. It mandates a specific procedure that needs to be followed for filing a complaint and seeking redressal.

📋 Step-by-Step Procedure for Filing a Cheque Bounce Case
1. Presentation of Cheque
The cheque must be presented to the bank within three months of the date mentioned on it. If the cheque bounces, the bank will issue a “Cheque Return Memo” citing the reason for dishonour.
2. Issuing a Legal Notice (within 30 days)
The payee must send a demand notice to the issuer within 30 days of receiving the cheque return memo. The notice should:
Inform the issuer about the cheque bounce.
Demand payment of the cheque amount within 15 days from the receipt of the notice.
The notice should ideally be sent via registered post or speed post to maintain proof of delivery.

3. Waiting Period of 15 Days
The issuer is given a 15-day period to clear the dues. If the issuer pays during this period, the matter is resolved, and no further legal action is required.

4. Filing a Complaint (within 30 days after lapse of the 15-day period)
If the issuer fails to make payment within the stipulated 15 days, the payee can:
-File a criminal complaint under Section 138 in the appropriate Magistrate’s court.
-The complaint must be filed within 30 days from the expiration of the payment period.

5. Court Proceedings
Once the complaint is filed:
– The court reviews the complaint and issues a summons to the issuer.
– Both parties present their arguments and evidence.

If found guilty, the issuer can face:
– Imprisonment of up to 2 years,
– A fine up to twice the cheque amount, or
– Both.

The parties may also choose to settle the matter outside court during proceedings.
📄 Documents Required for Filing a Cheque Bounce Case
Original bounced cheque.
Bank’s cheque return memo.
Copy of the legal notice and proof of its delivery.
Postal receipts (registered/speed post acknowledgment).
Any correspondence between both parties (emails, SMS, etc.).