Cheque Bounce Cases

A cheque bounce is an offence under Section 138 of the Negotiable Instruments Act, 1881 (“Act”) punishable with a fine which can extend to twice the amount of the cheque or imprisonment for a term not more than two years or both. When the payee presents a cheque to the bank for payment, and the cheque is returned unpaid by the bank with a memo of insufficient funds, then the cheque is said to have bounced.

A cheque bounce can occur due to several reasons, but if a cheque bounces due to insufficient funds in the drawer’s account, it amounts to an offence under the Act. The bank must reject the cheque presented for payment with a return memo stating the reason as insufficient funds. In such a case, the payee of the cheque can issue a cheque bounce notice to the drawer demanding to pay the cheque amount.

For registering a complaint the drawee must have all the documents

1. Cheque and cheque returned memo issued by the bank

2. Written complaint

3. Legal notice photocopy/Xerox

4. Letter of the oath/sworn affidavit

If the payment is not made by the drawer/payee then the complainant is to file a criminal case under 138 of the act. Against the drawer within the 30 days from the date of expiry of 15 days specified in the notice. After filing the complaint in the court, the court should find prima facie in the complaint, then a summons will be issued to the accused. After summons has been serviced to the accused and he abstains from appearing in the court then the court may issue a bailable warrant.

- After the appearance of the accused/ drawer then he must furnish a bail bond to ensure his appearance during trial.

- The complainant may present his evidence in the court and produce all the original documents in support of complaint.

- Accused also given an opportunity to produce his documents to give his evidence.

- The final stage of the proceedings is that of the arguments by both sides of the parties and after hearing the arguments by the court, the court will pronounce a judgment.