“Cheque Bounce Matters: Your Legal Rights & Recourse Explained”

In the world of financial transactions, cheques are a common and trusted mode of payment. However, when a cheque is dishonoured or “bounced,” it can lead to not just monetary loss but also legal complications. In India, cheque bounce is not merely a financial issue—it is a criminal offence under the law.

This article breaks down the legal rights and remedies available when a cheque bounce occurs and explains how you can safeguard yourself legally and financially.


What is Cheque Bounce?

A cheque bounce occurs when a bank refuses to honour a cheque. The most common reasons include:

  • Insufficient funds in the drawer’s account

  • Signature mismatch

  • Stale or expired cheque

  • Account closed

  • Mutilated or overwritten cheque

When a cheque is bounced due to insufficient funds, it attracts penal provisions under the Negotiable Instruments Act, 1881, particularly Section 138.


Legal Framework: Section 138 of the NI Act

Section 138 of the Negotiable Instruments Act, 1881 deals specifically with the offence of cheque dishonour due to insufficient funds. It makes the drawer (the person who issued the cheque) liable for criminal prosecution if the cheque is dishonoured and legal conditions are fulfilled.


Steps to Take When a Cheque Bounces

1. Obtain a Cheque Return Memo

When the cheque bounces, the bank issues a “cheque return memo” stating the reason for dishonour. This is the first official document needed to initiate legal action.

2. Send a Legal Notice

The payee (person to whom the cheque was issued) must send a legal notice to the drawer within 30 days of receiving the return memo. The notice should demand the cheque amount and give the drawer 15 days to make payment.

3. File a Complaint

If the drawer fails to pay within 15 days, the payee can file a criminal complaint in court under Section 138, within 30 days after the lapse of the notice period.


Penalties for Cheque Bounce

Under Section 138, if found guilty, the drawer may face:

  • Imprisonment of up to 2 years, or

  • Monetary fine which may extend to twice the amount of the cheque, or

  • Both

The court may also direct the drawer to compensate the payee in addition to the criminal penalty.


Defence Available to the Drawer

The accused drawer can present several legal defences, such as:

  • Proving that no legally enforceable debt existed

  • Demonstrating that the cheque was issued under coercion or fraud

  • Showing payment was already made through other means


Civil Remedies Alongside Criminal Action

In addition to a criminal complaint, the payee can also file a civil suit for recovery of the cheque amount under Order XXXVII of the Civil Procedure Code. This allows the aggrieved party to seek compensation, interest, and legal costs.


Precautions to Avoid Cheque Bounce

  • Always maintain sufficient balance in your account.

  • Regularly update and verify your signature with the bank.

  • Avoid issuing post-dated or expired cheques.

  • Communicate with the payee in case of a financial issue to avoid legal escalation.


Conclusion: Stay Legally Aware & Financially Responsible

Cheque bounce cases can be disruptive, but Indian law provides a clear and structured legal path for recovery and justice. Whether you’re the issuer or the receiver of a cheque, understanding your rights, timelines, and legal responsibilities is key.

Leave a Reply

Your email address will not be published. Required fields are marked *

As per the rules of the Bar Council of India, we are not permitted to solicit work and advertise. By accessing and using this website, the user acknowledges the following:
The user wishes to gain more information about us for his/her own information and use;
There has been no advertisement, solicitation, invitation or inducement of any sort whatsoever from us or any of our members to solicit any work through this website;
The information about us is provided to the user only on his/her specific request and any information obtained or materials downloaded from this website is completely at the user’s volition and any transmission, receipt or use of this site would not create any lawyer-client relationship.
The information provided herein should not be interpreted as legal advice, for which the user must make independent inquiries.
Whilst every effort has been taken to ensure the accuracy of the contents of this website,  Delhi Legal disclaims all liability arising from reliance placed by the user or any other third party on the information contained or provided under this website.