Cheque Bounce – How to Take Legal Action

Cheque bounce refers to a situation when a banker refuses to pay a cheque that has been presented to it on grounds of insufficient funds or other technical grounds like mismatch of signature. In India, the dishonour of a cheque upon insufficiency of funds is classified as a criminal offence under Section 138 of the Negotiable Instruments Act, 1881.

Actions to Commence Legal Proceedings:

• Memo for return of the cheque – This is issued by the bank when a cheque is dishonoured.
• Legal Notice – This should be sent to the issuer of the cheque within 30 days of receipt of the memo.
• Await a Response – The issuer has 15 days to make the payment.
• Complaint – If such payment is not made, a local criminal complaint should be filed before the concerned Magistrate's court within 30 days post 15 days.
• Court Advent – The courts may summon the issuer, who, after trial, could be found guilty and sentenced to imprisonment for a term extending up to 2 years or with a fine extending up to twice the amount of the cheque or with both.

Pro-Tips: Do’s and don’ts:

• Do not delay sending the legal notice; any undue delay will result in a lapse of a case.
• Keep a copy of the cheque, bank memo, and evidence of sending a notice.
• Ensure that the cheque was issued for a legally enforceable debt or liability. Gifts or donations are no good.

FAQs – Cheque Bounce Legal Action

1. What is a cheque bounce?

When the bank refuses to honour a cheque for reasons such as insufficient funds, mismatched signatures, or a closed account.

2. Which law governs cheque bounce in India?

Section 138 of the Negotiable Instruments Act, 1881.

3. Is cheque bouncing civil or criminal?

It is a criminal offence, but a civil suit may be filed for recovery.

4. What is the first step after a cheque bounces?

Obtain the return memo from the bank.

5. How soon must I send a legal notice?

Within 30 days of receiving the bank's cheque return memo.

6. What is stated in the legal notice?

Details of the bounced cheque, cause for dishonour, notice for payment, and a payment deadline of 15 days.

7. How long does the cheque issuer have to pay after receiving the notice?

After receiving the notice, the cheque issuer has 15 days.

8. What if payment is not made within the 15 days?

The complainant can file a criminal complaint in the Magistrate's Court within 30 days of the expiration of the 15 days.

9. Can I send the notice by email or WhatsApp?

It is better to send the notice via Registered Post with Acknowledgement Due or courier with proof of delivery.

10. What penalties can the court give in the cheque bounce case?

Punishment for a maximum term of 2 Years of imprisonment, or to pay a fine which may extend to twice the amount of the cheque, or both.

11. Can I ask for interest on the cheque amount?

Yes, you can request it with your complaint.

12. Can a post-dated cheque bounce be challenged under Section 138?

Yes, if it was for a legally enforceable debt or liability.

13. Can I file a case for a bounced gift cheque?

No, Section 138 applies only if the cheque was issued for a debt or liability and does not include gifts or donations.

14. What if the cheque is stopped by the issuer's bank?

If the cheque was for a debt/liability, he is still punishable under Section 138.

15. Is it okay to file the case where I inhabit?

Yes, you can file it in the city where your bank (that returned the cheque) is situated.

16. Can multiple bounced cheques from the same person go in one case?

Each bounced cheque is generally a separate offence, but on rare occasions, courts accept clubbing if they are part of one transaction.

17. What happens if I miss the 30-day notice?

You will lose criminal action under Section 138; civil recovery is still possible.

18. Will the accused be able to file an appeal against the conviction?

They can appeal against their conviction to a higher court.

19. Will I need a lawyer for cheque bounce cases?

Strongly recommended, as these cases require proper drafting and compliance with procedures.

20. Can a company be prosecuted for cheque bounce?

Yes, if the cheque was issued by the company, both the company and its defaulting officers can be made accused.