A bounced cheque will keep you hanging when you expected the money to come from a loan or an invoice issued by a business. When you do not hear back from the issuer of the bounced cheque, you might wonder whether you should write a notice or approach a lawyer.
The Negotiable Instruments Act, 1881 in India offers certain provisions under Section 138 regarding cheque dishonour cases. But there are some legal formalities that one needs to follow in order to start a case for such an offence. In case you get a notice regarding the dishonour of a cheque, you need to know your time frame as well as your legal options.
What Is a Cheque Bounce Case Under Section 138?
A cheque bounce case will only come into existence if there is a dishonoured cheque that has been issued for a debt that is enforceable by law under Section 138.
For instance, if you lend an individual Rs 1 lakh, and the individual makes a cheque to pay back the amount borrowed from you. Then in the case where the cheque is returned by the bank due to lack of sufficient balance, it may fall within the ambit of Section 138.
This provision also includes some instances where the amount is greater than the amount agreed upon with the bank. However, not all dishonored cheques will lead to criminal proceedings.
To pursue a cheque bounce case, the key requirements generally include:
- The cheque should have been written in respect of a legally binding debt or liability.
- It should be presented within the period of validity.
- The payee or holder in due course should deliver a written notice demanding payment within the prescribed period.
- The drawer should fail to make payment of the cheque amount within 15 days after the delivery of the notice.
They decide if the dishonour of a cheque is punishable as per Section 138 of the Negotiable Instruments Act.
What Is the Cheque Bounce Notice Period and Time Limit?
Failing to meet a statutory deadline may hinder your case even if the amount still has not been paid. Section 138 has laid down a series of deadlines which the holder of the cheque must adhere to.
Stage | Applicable time limit |
Present the cheque | Within its validity period, generally three months from the date on the cheque |
Send a demand notice | Within 30 days of receiving information from the bank about dishonour |
Allow the drawer to pay | 15 days from receipt of the notice |
File the complaint | Within one month after the cause of action arises, subject to the court's power to condone delay for sufficient cause |
How does the timeline work?
Imagine that your bank has informed you about a dishonored cheque on 1 October. In that case, you will have to deliver the notice of statutory demand within 30 days of the date when the information was conveyed to you. If the drawer has received the notice and still has not paid the cheque amount within the period of 15 days, then the cause of action will accrue thereafter.
These are only example dates. The actual dates will vary based upon the specific dates involved, the applicable rules regarding computation of time, and the facts surrounding service.
Never wait till the last moment before seeking legal counsel. While a court might accept your late filing of a complaint for good reason, you can never take for granted that you will get the extension.
How to File a Cheque Bounce Case in India
In case the payment is still outstanding, adhering to the right process regarding a cheque bounce case can ensure that you do not make avoidable mistakes.
Step 1: Obtain the bank return memo
Keep the dishonored cheque and the return memo issued by the bank. This memo states the cause of dishonour and provides important dates.
Step 2: Send a cheque bounce legal notice
Write a letter of demand within 30 days of getting information regarding the dishonor of the cheque from the bank. It should be an explicit demand for the payment of the amount of the cheque in accordance with statutory requirements.
Retain copies of the legal notice along with proof of dispatch. This is because it may be very important in the context of service of notice.
Step 3: Allow 15 days for payment
The drawer will be given the statutory 15-day period after receiving the notice to pay the cheque amount. It will be premature to file the complaint before the expiry of this period.
Step 4: Prepare and file the complaint
In case the drawer does not honor his payment responsibility during the stipulated period, then the payee or holder in due course may think of filing a written complaint against him before the concerned Magistrate within the relevant time limit. The matter will be decided by the concerned court under Section 142 of the Act.
Step 5: Attend the court proceedings
Following filing, the case may progress via court examination, summons, appearance of the accused, evidence, examination, and arguments as required. The exact process depends on the nature of the case and the approach of the court.
What Documents Are Required for a Cheque Bounce Case?
The absence of documents will create difficulty in proving the reason for the issuance of the cheque and the outstanding amount. Arrange the necessary documents before filing the complaint.
- Dishonoured cheque: The original cheque and a copy, where available.
- Bank return memo: Evidence of the dishonour and the recorded reason.
- Demand notice: A copy of the statutory notice sent to the drawer.
- Proof of dispatch or service: Postal receipts, tracking records, acknowledgements, or other relevant evidence.
- Debt or transaction records: Loan agreements, invoices, contracts, account statements, or payment records, depending on the transaction.
- Correspondence: Relevant messages or communications concerning the debt, cheque, or repayment.
The necessary documents shall depend on the case. Maintain all original documents and ensure no tampering of messages and money transactions.
What Is the Punishment for a Cheque Bounce Under Section 138?
According to Section 138, the punishment that can be imposed on the offender is imprisonment up to two years, or a fine up to double the amount of the cheque, or both.
For instance, in case the cheque value is Rs 1 lakh, the maximum penalty prescribed under the law could be Rs 2 lakhs. However, this does not imply that the penalty will always be this much. It all depends on the case specifics and facts of the matter.
Furthermore, Section 143A allows a court to award interim compensation, which can be made during the hearing. If applicable, the interim compensation can go up to 20 percent of the cheque amount.
A cheque bounce case is not only a procedure to administer punishment. The process may assist in resolving the financial issue, but the result and the compensation achieved are not certain.
What Are the Possible Defences in a Cheque Bounce Case?
Just because you receive the legal notice does not necessarily mean that you must disregard it or think you will definitely be found guilty. It all depends on the transaction and the cheque itself.
Potential issues in a cheque bounce case defence include:
- No legally enforceable debt: Whether an existing debt or liability existed at the time the cheque came into consideration.
- Payment already made: Whether there is evidence that the payment was actually made or the liability discharged in some other way.
- Disputed amount or transaction: Whether there is a dispute regarding the amount or the transaction.
- Disputed issuance or signature: Whether the evidence casts a genuine doubt on the execution or authorisation or delivery of the cheque.
- Failure to meet statutory requirements: Whether the cheque was presented within time, the notice of demand fulfilled all statutory requirements, and proper time was given.
Sections 118 and 139 of the Negotiable Instruments Act make evidential presumptions in certain situations. An accused can overcome such presumptions by using legal evidence; denial of the debt alone may not suffice to do so.
The defense needs to be evaluated based on the real facts and the relevant law. No specific defence will always result in dismissal of the case.
Can a Cheque Bounce Case Be Settled?
The cheque bouncing case can be resolved, and the Section 138 offenses can be compounded.
It is possible that the settlement will take place via the payment of the outstanding balance in a lump sum or over a period of time as per agreement. In order to come to an arrangement, it is essential to put down on paper the details regarding the amount, dates for payments, consequences of defaulting, and requirements for settling the pending case.
When a case has already been filed, even the exchange of messages and agreement to payment is not enough to settle the court case.
How Long Does a Cheque Bounce Case Take?
There is no standard timeline that exists for cheque bounce cases. While the legal system has made procedural provisions with the intent of ensuring speedy trial, the actual timeline would depend upon certain factors.
Some of these factors are if notice was given, if the accused appeared in court, the number of witnesses, issues of evidence, adjournments, and even the option of a settlement.
It is important to note that there is a difference between the deadlines for issuing notice and filing a complaint and the timeline required for completion of the case. If you are trying to claim your dues or fighting a complaint against you, you may want to consult a Criminal lawyer.
When Should You Consult a Cheque Bounce Lawyer?
Whether it is about recovering dues payment or responding to a Section 138 notice, appropriate legal advice will guide you on how to proceed with your case prior to its expiry date. VakeelSaab helps you to connect with lawyers who match your legal query, location, language and budget.
The online consultation with VakeelSaab provides the facility to talk with a lawyer via phone, video, or chat, sharing the related documents and discussing the matter prior to your further action. From interpreting a legal notice to exploring various ways like filing, defence, or settling the matter, you can seek legal guidance at your choice.