Introduction
In today’s business world, cheques are a widely accepted mode of payment. However, issues arise when cheques get dishonoured, leading to serious legal consequences. In India, Section 138 of the Negotiable Instruments Act, 1881 (NI Act) deals with cheque bounce cases.
In this guide, we’ll explain everything you need to know about Section 138 cases—from its meaning and legal procedure to penalties and important timelines.
A cheque is not merely a piece of paper; it represents a promise, and breaking it carries consequences.
What is Section 138 of the Negotiable Instruments Act?
Section 138 of the NI Act is a penal provision that deals with cases where a cheque is dishonoured due to:
Insufficient funds
Account closed
Payment stopped by drawer
It is considered a criminal offense, and legal action can be initiated against the defaulter.
When Does Section 138 Apply?
Section 138 applies when:
A cheque is issued towards legally enforceable debt or liability.
The cheque is presented within 3 months from the date of issue.
The cheque is dishonoured by the bank.
A written demand notice is sent within 30 days of dishonour.
The drawer fails to pay the amount within 15 days of receiving the notice.
Step-by-Step Legal Procedure for Cheque Bounce Cases
Step 1: Send Legal Notice
Send a demand notice to the drawer within 30 days of the cheque being dishonoured.
The notice must mention the cheque amount, date of dishonour, and request payment within 15 days.
Step 2: File a Complaint
If no payment is made within 15 days, a criminal complaint can be filed under Section 138.
Complaint must be filed within 30 days from the expiry of the notice period.
Step 3: Court Proceedings
The court will issue a summons to the accused.
Both parties will present their arguments.
The court may either acquit or convict the accused based on evidence.
Punishment for Cheque Bounce Under Section 138
If found guilty, the accused may face:
Imprisonment up to 2 years, or
Fine up to twice the cheque amount, or
Both.
Additionally, the court may order compensation to the complainant.
Defenses Available in Cheque Bounce Cases
No legal liability existed at the time of issuing the cheque.
The cheque was issued as a security deposit, not for payment.
Amount mentioned is exaggerated or incorrect.
Conclusion
Section 138 of the NI Act ensures accountability in financial transactions and protects the rights of the payee. If you’ve been served with a cheque bounce notice or need to take action against a defaulter, it’s advisable to consult a qualified lawyer for timely and effective legal remedies.
FAQs
1. Can a cheque bounce case be settled outside the court?
Yes, the parties can settle through mutual agreement or compromise before or during trial.
2. Is cheque bounce a civil or criminal offense?
Cheque bounce under Section 138 is a criminal offense with financial penalties.
3. What is the time limit for filing a cheque bounce case?
Within 30 days after the expiry of 15 days from the date of receiving the legal notice.