Cheque Bounce Cases

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Cheque Bounce Cases

Legal Assistance Under the Negotiable Instruments Act, 1881

A cheque bounce occurs when a bank refuses to honor a cheque due to insufficient funds, signature mismatch, overwriting, or stop-payment instructions by the drawer. Under Section 138 of the Negotiable Instruments Act, 1881, issuing a dishonored cheque is a criminal offense, punishable by imprisonment of up to two years, a fine up to twice the cheque amount, or both.

Cheque bounce cases are common in business transactions, loan repayments, rental agreements, and supplier payments. Kapil Dixit LLP provides legal representation for individuals, businesses, and financial institutions in cheque bounce matters, ensuring compliance with legal procedures for filing complaints, defending allegations, and recovering unpaid amounts.

Legal Process for Cheque Bounce Cases

Step 1: Legal Notice for Dishonored Cheque

  • A legal notice must be sent to the cheque issuer within 30 days of receiving the dishonor memo from the bank.
  • The notice should clearly state the cheque details, the reason for dishonor, and a demand for payment within 15 days.
  • If the payment is not made within 15 days, legal proceedings can be initiated.

Step 2: Filing a Criminal Complaint Under Section 138

  • If the drawer fails to respond or make the payment, the payee can file a criminal complaint in the jurisdiction where the cheque was presented for clearance.
  • The complaint must be filed within 30 days from the expiry of the notice period.
  • The court will then issue summons to the accused, requiring them to appear for trial.

 

Quashing Of FIR: Legal Grounds, Guidelines, and Landmark Judgments

Step 3: Court Proceedings & Trial

  • The complainant must provide evidence, including:
    • The dishonored cheque.
    • Bank memo stating the reason for dishonor.
    • Copy of the legal notice sent to the drawer.
    • Proof of non-payment within the stipulated period.
  • The accused can defend the case by proving lack of legal liability, fraud, material alteration, or prior payment.

Step 4: Judgment & Legal Consequences

  • If found guilty, the court may impose:
    • Imprisonment up to two years.
    • Fine up to double the cheque amount.
    • Compensation to the complainant.
  • If the accused is acquitted, the complainant may pursue civil remedies for cheque recovery.

Jurisdiction in Cheque Bounce Cases

As per the Negotiable Instruments (Amendment) Act, 2018, a cheque bounce case must be filed:

  • Where the payee’s bank is located – The case is filed where the cheque was deposited for clearance.
  • Before the Metropolitan or Judicial Magistrate – The case must be filed in the court of competent jurisdiction.

Defenses Available in Cheque Bounce Cases

 

The accused may raise the following defenses in a cheque dishonor case:

  1. No Legal Liability – The cheque was not issued for a legally enforceable debt.
  2. Cheque Was Issued as a Security Deposit – If the cheque was issued as a security and not for payment, it may not attract liability under Section 138.
  3. Forgery or Misuse – If the cheque was stolen or forged, the accused can contest its validity.
  4. Material Alteration – Any unauthorized modification in date, amount, or payee name invalidates the cheque.
  5. Payment Already Made – If the drawer has already settled the amount, the case may be dismissed.
  6. Expired Cheque – A cheque older than three months from the date of issue is invalid.
  7. Account Closed or Insufficient Balance Due to Bank Error – If the cheque bounced due to a bank’s error, the drawer may contest the claim.

Kapil Dixit LLP provides legal defense for accused individuals and companies in cheque bounce cases.

Legal Remedies for the Payee in a Cheque Bounce Case

 

If a cheque issued for a valid financial obligation is dishonored, the payee has the following legal remedies:

  1. Filing a Complaint Under Section 138 – Initiate criminal proceedings against the drawer.
  2. Filing a Civil Recovery Suit – Pursue a summary suit for cheque recovery with interest and damages.
  3. Insolvency Proceedings – If the drawer repeatedly fails to make payments, insolvency action can be taken.
  4. Filing a Case Under Section 420 IPC – If the cheque was issued fraudulently, a case for cheating may be filed.
  5. Proceedings Under the Companies Act – If the drawer is a company, legal action can be taken against directors and officers responsible for issuing the cheque.

Frequently Asked Questions (FAQs)

What is the penalty for a bounced cheque in India?

If found guilty under Section 138 of the Negotiable Instruments Act, the court may impose:

  • Imprisonment up to two years.
  • Fine up to double the cheque amount.
  • Compensation to the payee.

What is the time limit to file a cheque bounce case?

The complaint must be filed within 30 days from the expiry of the 15-day notice period.

Can a cheque bounce case be settled out of court?

Yes, cheque bounce cases can be settled through mediation or out-of-court negotiations before or during trial.

What happens if the accused does not attend court hearings?

The court may issue a bailable or non-bailable warrant, and non-compliance may lead to ex-parte proceedings.

Can a company be prosecuted for issuing a dishonored cheque?

Yes, under Section 141 of the Negotiable Instruments Act, both the company and its directors may be held liable for cheque dishonor.

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Why Choose Kapil Dixit LLP for Cheque Bounce Cases?

  • Legal Representation in Magistrate Courts, Sessions Courts, and High Courts.
  • Drafting and Responding to Legal Notices Under Section 138.
  • Filing Complaints & Defending Against Wrongful Allegations.
  • Cheque Recovery Through Civil & Criminal Remedies.
  • Negotiation & Alternative Dispute Resolution for Cheque Disputes.

About Kapil Dixit LLP – Legal Practice in Negotiable Instruments Act Cases

Kapil Dixit LLP represents clients in cheque bounce cases, financial fraud disputes, and commercial transactions involving dishonored cheques. The firm provides:

  • Legal Notices & Court Representation – Drafting legal notices, filing complaints, and appearing in court.
  • Cheque Recovery & Settlement Negotiations – Legal action for recovering unpaid cheque amounts.
  • Corporate & Business Litigation – Advising businesses on cheque-related liabilities.
  • Defenses Against Wrongful Prosecution – Representing accused individuals and companies.

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