Cheque Bouncing Matters

Cheques are used in almost all transactions such as re-payment of loan, payment of salary, bills, fees, etc. A vast majority of cheques are processed and cleared by banks on daily basis. Cheques are issued for the reason of securing proof of payment Cheque Bouncing issues solving company bangalore. Nevertheless, cheques remain a reliable method of payment for many people. On the other hand, it is always advisable to issue crossed “Account Payee Only” cheques in order to avoid its misuse.

A cheque is a negotiable instrument. Crossed and account payee cheques are not negotiable by any person other than the payee cheque BOUNCING IS A CRIMINAL OFFENCE IN bangalore. The cheques have to be deposited into the payee's bank account.

Legally, the author of the cheque is called ‘drawer’, the person in whose favour, the cheque is drawn is called ‘payee’, and the bank who is directed to pay the amount is known as ‘drawee’.

However, cases of cheque bounce are common these days. Sometimes cheques bearing large amounts remain unpaid and are returned by the bank on which they are drawn.

The below article provides information on what you may do if your cheque is dishonoured? Here’s a step-by-step guide to the legal procedure that is available to you.

If a cheque is dishonoured

When a cheque is dishonoured, the drawee bank immediately issues a ‘Cheque Return Memo’ to the banker of the payee mentioning the reason for non-payment. The payee’s banker then gives the dishonoured cheque and the memo to the payee. The holder or payee can resubmit the cheque within three months of the date on it, if he believes it will be honoured the second time Cheque bounce problem solving bangalore. However, if the cheque issuer fails to make a payment, then the payee has the right to prosecute the drawer legally.

The payee may legally sue the defaulter / drawer for dishonour of cheque only if the amount mentioned in the cheque is towards discharge of a debt or any other liability of the defaulter towards payee.

If the cheque was issued as a gift, towards lending a loan or for unlawful purposes, then the drawer cannot be prosecuted in such cases.

Legal action

The Negotiable Instruments Act, 1881 is applicable for the cases of dishonour of cheque. This Act has been amended many times since 1881.

According to Section 138 of the Act, the dishonour of cheque is a criminal offence and is punishable by imprisonment up to two years or with monetary penalty or with both.

If payee decides to proceed legally, then the drawer should be given a chance of repaying the cheque amount immediately. Such a chance has to be given only in the form of notice in writing.

The payee has to sent the notice to the drawer with 30 days from the date of receiving “Cheque Return Memo” from the bank. The notice should mention that the cheque amount has to be paid to the payee within 15 days from the date of receipt of the notice by the drawer. If the cheque issuer fails to make a fresh payment within 30 days of receiving the notice, the payee has the right to file a criminal complaint under Section 138 of the Negotiable Instruments Act.

However, the complaint should be registered in a magistrate’s court within a month of the expiry of the notice period. It is essential in this case to consult an advocate who is well versed and experienced in this area of practice to proceed further in the matter.

Fine points: Conditions for prosecution

  • Legally, certain conditions have to be fulfilled in order to use the provisions of Section 138.
  • The cheque should have been drawn by the drawer on an account maintained by him.
  • The cheque should have been returned or dishonoured because of insufficient funds in the drawer's account.
  • The cheque is issued towards discharge of a debt or legal liability.

After receiving the notice, if the drawer doesn't make the payment within 15 days from the day of receiving the notice, then he commits an offence punishable under Section 138 of the Negotiable Instruments Act.

Punishment & penalty

On receiving the complaint, along with an affidavit and relevant paper trail, the court will issue summons and hear the matter. If found guilty, the defaulter can be punished with monetary penalty which may be twice the amount of the cheque or imprisonment for a term which may be extended to two years or both. The bank also has the right to stop the cheque book facility and close the account for repeat offences of bounced cheques.

If the drawer makes payment of the cheque amount within 15 days from the date of receipt of the notice, then drawer does not commit any offence. Otherwise, the payee may proceed to file a complaint in the court of the jurisdictional magistrate within one month from the date of expiry of 15 days prescribed in the notice.

Cheque bounce is a criminal offence under The Negotiable Instruments Act which deals with the subject of cheque bouncing, Cheque dishonor or Cheque return matters. Cheque bouncing happens when a person has issued a Cheque without maintaining sufficient amount in his account as a result of the same when the Cheque is presented for encashment; the same is returned by the bank unpaid which is termed as bouncing of Cheque. The law related to bouncing of Cheque is contained in The Negotiable Instruments Act and a specific provision under Section 138 of the Negotiable Instruments Act deals with bouncing of Cheque besides the provisions under the IPC and the Code of Criminal Procedure of 1973. The case of cheque bouncing is tried as a summary trial case before the court of Magistrate under the Criminal Procedure Code of 1973. We have tried to explain the process in our article How to File Case Against Cheque Bounce and the steps involved in brief as under.


Notice is the first step of how to file case against cheque bouncing Cheque bounce problem solution services company bangalore. Notice against bouncing of Cheque is to be issued within one month of the date of return of the Cheque by the bankers. Service of notice on the person issuing the Cheque is mandatory; the mode of service of notice can be any recorded delivery which is admitted as evidence under the Indian Evidence Act.Notice should be sent by Registered AD., Speed Post only. The purpose of making such provision is to make the person issuing the Cheque aware about the fact that the Cheque issued by him has been returned by his bankers due to insufficiency of funds in the account and he has to make arrangement for the amount within the stipulated period and intimate the banker as well as the person to whom the Cheque has been given by him.


The filing of the complaint is the second important stage of how to file case against cheque bounce and should be done carefully through a highly qualified lawyer. The complaint is to be filed before the Magistrate of the area concerned within 30 days from the date of dispatch of notice under Section 138 of the Negotiable Instruments Act.


The court issues notice to the accused person or the person who has issued the cheque after the filing of the complaint and the said person is required to appear before the court and seek bail from the court and contest the matter if any friable issue is raised by him.


The evidence in support of the complaint is the cheque, the memo issued by the bank and the record showing the service of notice on the person who has issued the cheque and all other relevant documents in support of the matter which can prove that the accused is under legal obligation to pay the amount under the bounced cheque.


The process of trial for cases under Section 138 of the NI Act is summary and the court has to take into consideration the records furnished by the complainant and the evidence in support. The complainant is asked to lead his evidence during which he summons the records from the bank related to the cheque . The accused is given the opportunity to cross-examine. The accused is thereafter asked to lead his evidence and rebut the allegations against him. The court then proceeds to dispose of the matter on the merits and accordingly arguments on all issues are head and the matter is decided accordingly.


The punishment as contained under Section 138 of the NI Act is two years and a penalty of the amount equal to two times of the amount as mentioned on the cheque.

The person who has issued the cheque can be jailed besides the direction to pay double the amount of money as mentioned on the cheque and the court may also impose the penalty on the said person.


As per the latest judgment of Supreme Court, all cases filed under Negotiable Instruments Act for bouncing of cheques can only be filed within the territorial jurisdiction of the courts where the drawee bank is located. This limits the jurisdiction of filing of the cases against bouncing of cheques at all other places other than the drawee’s branch of the bank.

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