Adish Joy
A cheque bounce may seem like a simple financial hiccup, but under Indian law it carries serious legal consequences. Section 138 of the Negotiable Instruments Act 1881, makes dishonouring a cheque due to insufficient funds or exceeding an agreed arrangement with the bank a criminal offence. This provision is designed to maintain trust and reliability in commercial transactions. However, what many people don’t realize is that the cheque bounce law operates on a strict timeline, and following each step correctly is crucial. One missed deadline or procedural error can result in the case being dismissed, no matter how valid the complaint.Let’s break down how the legal process works.The Step-by-Step Procedure After a Cheque BouncesThe first step begins when a cheque is issued and later presented to the bank for payment. It’s important to note that the cheque must be presented within three months from the date mentioned on it. Presenting the cheque after three months makes it legally invalid under Section 138.
If the cheque is dishonoured, the bank provides a document called a return memo. This memo outlines the reason for dishonour, which is most commonly insufficient funds, account closure, or exceeding the amount arranged to be paid from that account by an agreement made with the bank. This is where the legal clock starts ticking.Upon receiving the return memo, the person to whom the cheque was issued (known as the payee) must take the next crucial step and that is sending a written notice to the person who issued the cheque (known as the drawer). The law gives the payee thirty days from the date of receiving information about the dishonour to send this legal notice. The notice must clearly demand payment of the cheque amount and give the drawer a chance to fulfil their obligation.After receiving the notice, the drawer has a fifteen-day period to pay the amount due. If they fail to do so within these fifteen days, the payee earns the right to take the matter to court. But here again, timing is everything. The law requires that the complaint be filed in court within thirty days after the fifteen-day payment window expires. Missing this deadline without a valid reason can cause the complaint to be dismissed at the outset.Where Should the Complaint Be Filed?One common source of confusion is the question of jurisdiction—where exactly should the complaint be filed? Initially, there were conflicting views on whether the case should be filed where the cheque was issued or where it was deposited. This was clarified by legislative amendments and court rulings, which now clearly state that the complaint must be filed in the city or area where the payee’s bank is located and that is where the cheque was presented for payment.
Common Mistakes in Cheque Bounce CasesThough the legal process appears straightforward, many complainants lose their cases not because they lack a valid claim, but because they overlook crucial procedural details. A common mistake is sending the legal notice too late, beyond the thirty-day period. Another frequent error involves sending a notice that lacks necessary information, such as the cheque number, amount, date, or the specific reason for dishonour. Additionally, not keeping proof of delivery of the notice, or failing to attach essential documents like the original cheque, the bank return memo, and copies of the notice, can result in the case being dismissed.
Another key oversight is missing the deadline to file the complaint. Courts are very strict when it comes to limitation periods. Filing the case even a day late without sufficient justification, can result in losing the right to prosecute under Section 138. Another mistake is assuming that just one notice can cover multiple bounced cheques, especially if the person issued several cheques. Legally, each cheque has to be treated separately and you must send individual notices for each cheque and if necessary, file separate complaints.
Trying to combine them often leads to confusion and gives the drawer an opportunity to raise technical objections that can derail the case.Possibility of SettlementIt’s worth noting that cheque bounce cases often end in settlement, even after the case has been filed in court. In recent years, courts have encouraged both parties to resolve disputes amicably to avoid lengthy litigation. If the drawer agrees to pay the amount due during the proceedings, the matter can often be compounded, meaning settled without further punishment or penalty.Why Following Procedure Matters
A dishonoured cheque is more than just a broken promise; it’s a legally recognized offence that can lead to penalties, fines, or even imprisonment. Specifically, under Section 138, the drawer can face imprisonment for up to two years, a fine that may extend to twice the amount of the cheque, or both. However, the strength of this provision lies entirely in following its procedural rules. Every step from presenting the cheque, to sending the notice, to filing the complaint comes with specific deadlines. Missing any of these can result in the complaint being rejected, regardless of how strong the case might be.For anyone dealing with a bounced cheque, understanding and adhering to this process is crucial. The law offers powerful remedies, but they are available only to those who act promptly and correctly. Knowing these steps could be the difference between recovering your money or losing the opportunity altogether.
