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 Check Bounce Cases
A step-by-step overview of Section 138 cheque bounce matters: issuing a dishonor notice, filing a criminal complaint, courtroom proceedings and final judgment.
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.
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:
- No Legal Liability – The cheque was not issued for a legally enforceable debt.
- 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.
- Forgery or Misuse – If the cheque was stolen or forged, the accused can contest its validity.
- Material Alteration – Any unauthorized modification in date, amount, or payee name invalidates the cheque.
- Payment Already Made – If the drawer has already settled the amount, the case may be dismissed.
- Expired Cheque – A cheque older than three months from the date of issue is no longer valid.
- 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:
- Filing a Complaint Under Section 138 – Initiate criminal proceedings against the drawer.
- Filing a Civil Recovery Suit – Pursue a summary suit for cheque recovery with interest and damages.
- Insolvency Proceedings – If the drawer repeatedly fails to make payments, insolvency action can be taken.
- Filing a Case Under Section 420 IPC If the cheque was issued fraudulently, a case for cheating may be
- Filing a Case Under Section 420 IPC – If the cheque was issued fraudulently, a case for cheating may be filed.
- 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.
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:
Why Choose Kapil Dixit LLP for Cheque Bounce Cases?
Our lawyers in Bangalore handle all facets of cheque bounce disputes from Section 138 notices and court representation to civil recovery and settlement negotiations.
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