Cheque Bounce Cases under Section 138, NI Act

What Constitutes an Offence

A cheque bounce becomes an offence under Section 138 only when certain conditions are met:

• The cheque was issued in discharge of a legally enforceable debt or liability.
• The cheque is presented to the bank within its period of validity.
• The bank returns the cheque unpaid, commonly due to insufficient funds, a mismatched signature, or an account being closed.
• The payee issues a written demand notice to the drawer within 30 days of receiving the bank’s dishonour memo.
• The drawer fails to make payment within 15 days of receiving that notice.

Only after all these steps are exhausted does the payee acquire the right to initiate criminal proceedings.

Filing a Complaint

If the drawer does not pay within the 15-day window, the payee can file a criminal complaint before the appropriate court within one month of the cause of action arising. The complaint must be accompanied by supporting documents — the original cheque, the bank’s return memo, the demand notice, and proof of its delivery.

Importantly, cheque bounce cases are treated as quasi-criminal matters. While the process follows criminal procedure, the underlying objective is largely compensatory — to ensure the payee recovers the amount owed.

Punishment and Remedies

On conviction, a court may impose:

• Imprisonment for a term of up to two years, or
• A fine that may extend to twice the cheque amount, or
• Both.

Courts frequently encourage settlement between parties, and payment of the cheque amount (often with compensation) can lead to the compounding of the offence, closing the matter without further litigation.

Common Defences

Drawers facing Section 138 proceedings often raise defences such as:

• The cheque was not issued for a legally enforceable debt.
• The signature does not match bank records due to no fault of the drawer.
• The demand notice was not served correctly or within the prescribed period.
• The complaint was filed beyond the limitation period.

Each defence depends heavily on the specific facts and the paper trail maintained by both parties.

Why Legal Guidance Matters

Cheque bounce litigation involves strict timelines — missing the 30-day notice window or the 30-day filing window after the notice period can be fatal to a complaint. At the same time, drawers need careful representation to raise legitimate defences and avoid unnecessary criminal liability.

At Bakshi and Associates, our team assists both payees seeking to recover dues and drawers defending against complaints, guiding clients through notice drafting, complaint filing, evidence compilation, and settlement negotiations to achieve efficient outcomes.