Introduction
A cheque is a widely used negotiable instrument in India for financial transactions. However, cheque bounce, or dishonor of a cheque, is a serious financial and legal issue. It can arise due to insufficient funds, a signature mismatch, account closure, or stop-payment instructions. Under Indian law, cheque bounce is both a civil and criminal offense, primarily governed by the Negotiable Instruments Act, 1881 and relevant provisions of the Indian Penal Code (IPC), 1860.
Legal Framework
Section 138 of the Negotiable Instruments Act, 1881
Section 138 of the Act makes cheque bounce a criminal offense if the cheque is dishonored due to insufficient funds or if it exceeds the amount arranged to be paid by the drawer. The key elements for invoking Section 138 include:
- The cheque must have been drawn for the discharge of a legally enforceable debt or liability.
- It must be presented within three months from the date of issuance.
- A demand notice must be sent to the drawer within 30 days of receiving the dishonor memo from the bank.
- The drawer must fail to make the payment within 15 days from the date of receipt of the demand notice.
If these conditions are met, the payee has the right to file a complaint in court.
Punishment for Cheque Bounce
Under Section 138, the drawer of the dishonored cheque can face:
- Imprisonment of up to two years or
- Fine up to twice the cheque amount, or
- Both imprisonment and fine
In addition to criminal liability, the payee can also file a civil suit to recover the amount due.
Defenses Available to the Drawer
The accused drawer may contest the case based on:
- The cheque was not issued for a legally enforceable debt.
- There was a material alteration in the cheque.
- The signature on the cheque was forged.
- The demand notice was not received.
- The cheque was obtained through fraud, coercion, or undue influence.
Procedure for Filing a Cheque Bounce Case
- Issue a Legal Notice: The payee must send a demand notice within 30 days of the cheque bounce.
- Wait for Response: The drawer has 15 days to make the payment.
- File a Complaint: If no payment is made, a case can be filed in a Magistrate’s Court within one month from the expiry of the 15-day period.
- Court Proceedings: The court may summon the accused, conduct hearings, and if found guilty, impose penalties as per law.
Recent Amendments and Judicial Pronouncements
The Negotiable Instruments (Amendment) Act, 2018 introduced provisions allowing courts to direct interim compensation to the complainant up to 20% of the cheque amount at the time of filing the complaint.
Conclusion
Cheque bounce cases significantly impact business transactions and personal financial dealings. To avoid legal complications, individuals and businesses must ensure proper maintenance of bank balances, avoid signing blank cheques, and address any disputes amicably. Legal recourse remains a vital tool to enforce financial accountability and uphold trust in negotiable instruments.
FAQs
Q1: Can a cheque bounce case be settled out of court?
Yes, the parties may opt for settlement through mediation or mutual agreement.
Q2: Can a cheque bounce case be filed after the 15-day notice period?
No, the case must be filed within one month from the expiry of the notice period.
Q3: Can an accused seek exemption from personal appearance in court?
Yes, under Section 205 of CrPC, the court may grant exemption on valid grounds.
Contributed by Ritik Sangwan(Intern)