A cheque bounce is a serious legal issue in India governed under Section 138 of the Negotiable Instruments Act, 1881. When a cheque issued to pay a debt or liability is returned unpaid by the bank, the payee has the right to initiate criminal legal proceedings against the drawer.
Common Reasons for Cheque Bounce:
1. Insufficient Funds in the account
2. Signature Mismatch
3. Account Closed or Frozen
4. Stop Payment instructions by the drawer
Step-by-Step Legal Process Under Section 138 NI Act:
1. Obtain Bank Return Memo:
Whenever a cheque bounces, collect the original Cheque Return Memo from the bank stating the official reason for dishonour.
2. Issue a Legal Notice (Within 30 Days):
A statutory Legal Notice must be drafted and sent to the drawer within 30 days from the date of receiving the return memo. The notice demands payment of the cheque amount within 15 days of receipt.
3. Wait for 15 Days Period:
The drawer is legally granted 15 days to pay the demanded amount. No court complaint can be filed during this mandatory notice period.
4. File a Criminal Complaint (Within 30 Days):
If the drawer fails to make the payment within 15 days, a formal criminal complaint must be filed before the Metropolitan Magistrate or Judicial Magistrate Court within the next 30 days.
Key Documents Required:
– Original Dishonoured Cheque
– Bank Return Memo
– Copy of Legal Demand Notice with Postal/Speed Post Receipts
– Delivery Tracking Report
– Affidavit of Evidence
Penalties for Cheque Dishonour:
Under Section 138, the convicted drawer can face imprisonment up to 2 years, or a fine up to twice the cheque amount, or both. Additionally, courts can grant interim compensation to the complainant under Section 143A.
If you are facing a cheque dishonor issue or need assistance in drafting a statutory legal notice, consult our legal team at Krishna Law Offices today.
