Cheque Bounce Case: Legal Guide & Penalties | Legal Manthan

Cheque Bounce Case: Section 138 of the Negotiable Instruments Act, 1881
Author: Advocate Bhupender Singh, Legal Manthan (www.legalmanthan.in)

The use of cheques in financial transactions is common in India. However, a bounced cheque is a serious issue, and legal action can be taken under Section 138 of the Negotiable Instruments Act, 1881. This article explains the legal provisions, procedures, and key points related to cheque bounce cases.

What is Section 138?

Section 138 of the Negotiable Instruments Act provides for punitive action in cases where a cheque is dishonored due to “insufficient funds.” This section applies only to cheques issued to discharge a financial liability.

Essential Conditions for a Cheque Bounce Case

To file a case under Section 138, the following conditions must be met:

1. Issuance of the Cheque: The cheque must be issued from a bank account and should be for the discharge of a financial liability.

2. Dishonor of the Cheque: The cheque must be dishonored by the bank due to “insufficient funds” or “account balance being insufficient.”

3. Presentation of the Cheque: The cheque must be presented to the bank within 3 months from the date of issue.

4. Sending a Legal Notice: The payee must send a written notice to the drawer within 30 days of the cheque being dishonored, demanding payment of the cheque amount.

5. Non-Payment: If the drawer fails to make the payment within 15 days of receiving the notice, the payee can initiate legal action under Section 138.

Legal Process for Cheque Bounce Cases

1. Filing a Complaint: The payee must file a criminal complaint in the appropriate court within 30 days from the date of the cause of action (i.e., after the 15-day period post-notice).

2. Hearing: The court will issue a summons to the drawer and begin the hearing.

3. Punishment: If the drawer is found guilty, they may face imprisonment for up to 2 years or a fine of up to twice the cheque amount, or both.

Key Points to Remember

• A cheque bounce case is a criminal offense, and bail is applicable.

• If the drawer makes the payment within 15 days of receiving the notice, the case is closed.

• Only the drawer of the cheque can be held liable, not the bank.

Importance of Sending a Legal Notice

Sending a legal notice is a crucial step in a cheque bounce case. Here’s why:

1. Mandatory Requirement: A legal notice is mandatory under Section 138. Without it, no legal action can be initiated.

2. Drafting by an Advocate: It is advisable to send the legal notice through an advocate to ensure it is legally sound and contains all necessary details.

3. Time-Bound: The notice must be sent within 30 days of the cheque being dishonored.

4. Contents of the Notice: The notice should include:

   • Details of the cheque (number, date, amount).

   • The fact that the cheque was dishonored.

   • A demand for payment within 15 days.

   • Consequences of non-payment (legal action under Section 138).

Conclusion

A cheque bounce case is a serious criminal matter, and Section 138 of the Negotiable Instruments Act provides for strict penalties. If you are dealing with a cheque bounce case or have a case filed against you, it is essential to seek legal advice from a qualified advocate.

At Legal Manthan (www.legalmanthan.in), we are committed to providing you with expert legal assistance for cheque bounce cases and other legal matters. Do not hesitate to reach out to us for any legal support.

Advocate Bhupender Singh
Legal Manthan
www.legalmanthan.in
Contact: +91 94663 71020
Email: adv.bhupender@gmail.com

Note: This article is for general informational purposes only and should not be considered legal advice. For specific cases, please consult a qualified advocate.