Section 138 of the Negotiable Instruments Act Explained (Legal Awareness)
Cheque transactions are commonly used in business and personal dealings in India. However, sometimes a cheque issued by a person may bounce or get dishonoured due to insufficient funds or other reasons. In such cases, the law provides a legal remedy under Section 138 of the Negotiable Instruments Act, 1881.
This article explains what cheque bounce means, the legal procedure to file a case, and the possible punishment under the law.
What is a Cheque Bounce?
A cheque bounce occurs when a bank refuses to honour a cheque presented for payment.
Common reasons for cheque dishonour include:
Insufficient funds in the account
Signature mismatch
Account closed
Payment stopped by the drawer
Incorrect cheque details
When a cheque issued towards payment of a legally enforceable debt or liability is dishonoured, it may lead to criminal proceedings under Section 138 of the Negotiable Instruments Act.
Legal Notice for Cheque Bounce
Before filing a court case, the law requires the payee to send a legal demand notice to the person who issued the cheque.
The process generally involves the following steps:
After the cheque is dishonoured, the bank provides a cheque return memo stating the reason for dishonour.
The payee must send a legal notice within 30 days from the date of receiving the cheque return memo.
The notice demands payment of the cheque amount from the drawer.
The drawer is given 15 days to make the payment after receiving the legal notice.
Filing a Cheque Bounce Case
If the drawer fails to make the payment within the specified time, the payee can file a criminal complaint in the appropriate court.
Important points:
The case must generally be filed within 30 days after the expiry of the 15-day notice period.
The complaint is usually filed before the Judicial Magistrate having jurisdiction.
Supporting documents such as the original cheque, bank return memo, and copy of the legal notice are required.
Punishment for Cheque Bounce
Under Section 138 of the Negotiable Instruments Act, the court may impose:
Imprisonment up to two years, or
Fine up to twice the amount of the cheque, or
Both imprisonment and fine
Courts may also encourage settlement or compounding of the offence if both parties agree.
Conclusion
Cheque bounce cases are taken seriously under Indian law because they affect financial credibility and business trust. Following the proper legal procedure, including sending a legal notice and filing a complaint within the prescribed time, is essential to seek legal remedy.
If someone faces issues related to cheque dishonour, it is advisable to seek proper legal guidance to handle the matter through lawful procedures.
