Cheque Dishonour: A step-by-step guide for legal recourse

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The dishonour of cheque is a criminal offence and is punishable by imprisonment up to two years or with a monetary penalty or with both.

How to file a Cheque Bounce case?

In India, a cheque bounce is a criminal offense as stipulated under Section 138 of
the Negotiable Instruments Act, 1881.

The following legal measures can be taken by the drawee of a cheque:

1) Sending of Cheque Bounce Notice (Legal Notice):

The first step after the cheque has been returned by the bank (cheque dishonour) is to send a formal demand legal notice/cheque bounce notice to the drawer within the stipulated time of 30 days from the date on the return memo. The legal notice or the cheque bounce notice must insist the amount (as mentioned in the cheque) from the drawer. The notice must also mention that if the amount is still not paid within the stipulated time period of 15 days, then appropriate legal action as prescribed under the Negotiable Instruments Act, 1881 shall be instituted against the drawer.

There is no established format for such a notice; however the cheque bounce notice must explicitly highlight the main objective of the notice that is to demand payment from the drawer while informing and warning the drawer of the legal consequences that might result due to non- payment of the pending amount. The drawee must preserve the delivery proof of the notice like the postal receipt/online status of the notice.

The said demand notice can be sent by the drawee himself, however, it is advisable to seek help from an expert cheque bounce lawyer to draft such a notice to be sure about the legal language.

2) Jurisdiction to file a case under sec. 138 (Cheque Dishonour) of the Negotiable Instruments Act

Under Section 138 of the Negotiable Instruments Act, 1881, the place where a cheque is delivered for collection i.e. the branch of the bank of the payee or holder in due course, where the drawee maintains an account, would be determinative of the place of territorial jurisdiction. Thus the territorial jurisdiction is to be determined by the place where the drawee maintains an account, which is the place where the territorial jurisdiction arises in terms of Section 142(2) of the Negotiable Instruments Act, 1881.

3. Filing of the Complaint:

A complaint is only affected when the drawer has not made the payment of the cheque amount within a period of 15 days from the delivery of the notice. A complaint is to be filed in the court which would have the jurisdiction over the dispute within the prescribed time limit of 30 days (from the date of receipt of the demand notice by the drawer).

The complaint should be filed before the Trial Court with supporting documents such as original returned cheque, original return memo, office copy of legal notice with acknowledgment for the receipt or delivery, proof for liability such as invoices, promissory note etc. If the court finds that a prima-facie a case is made out, then the complainant will be called to make sworn statement before the court upon which the accused would be summoned by the court.

4. Appearance of the Accused for Cheque Dishonour:

The accused shall appear in court in person with his Lawyer and if the accused fails to appear before the court then the court will issue a warrant against him.

5. Bail & furnishing of surety by the Accused:

Offence u/s 138 of the Negotiable Instruments Act is a bailable offence and the accused would be admitted on bail by the Court on furnishing of a personal bond; a surety bond by the accused. Court insists on the accused to furnish a surety to ensure his appearance before the Court during the entire trial.

6. Framing of notice upon the Accused:

After the accused is admitted on bail the concerned Court will ask him to take notice under Section 251 Cr.P.C. and enter his plea of defence and thereafter fix the case for defence evidence, unless an application is made by an accused under Section 145(2) of N.I. Act for recalling a witness for cross examination on plea of defence.

7. Application u/s 145(2) of the Negotiable Instruments Act:

If there is an application under Section 145(2) of N.I. Act for recalling a witness of
complainant, the court shall decide the same, otherwise, it shall proceed to take
defence evidence on record and allow cross examination of defence witnesses by complainant.

8. Cross-examination of the Complainant & his witnesses:

If the Court allows the application of the accused u/s 145(2) of the Negotiable Instruments Act then in that case the Complainant and his witnesses would be cross-examined by the Lawyer of the accused.

9. Defence evidence:

After the conclusion of cross-examination of Complainant & his witnesses the accused will lead evidence and the lawyer of the Complainant will cross-examine the Accused & his witnesses.

10. Final arguments of both sides:

After the conclusion of defence evidence the court hears the final arguments from both the sides.

11. Final order/judgment

Conclusion

The objectives of the proceedings of Section 138 of Negotiable Instruments Act is that
cheques should not be used by persons as a tool of dishonesty and once a cheque is issued by a person, it must be honoured and if Cheque Dishonour: A step-by-step guide for legal recourse, the person is given an opportunity to pay the cheque amount by issuance of a notice and if he still does not pay, he must face the criminal trial and consequences.

  • The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances. 
  • Easy Kanoon has the best lawyers to deal with cheque bounce cases in India. Email us at easykanoon@gmail.com