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What Should You Do If a Cheque Bounces?
If a cheque you received is not honoured by the bank, you need to take action.
In India, if a cheque is dishonoured under certain conditions, it can lead to legal action under Section 138 of the Negotiable Instruments Act, 1881, especially if it was issued for a legal debt or liability.
The law gives specific time periods for presenting the cheque, sending a notice, and filing a complaint.
Failing to follow these time limits can reduce your chances of getting legal help.
What Is a Cheque Bounce?
A cheque bounce happens when a bank returns a cheque unpaid.
This is also known as a cheque dishonour.Some common reasons for this include:
- Not enough money in the account
- The account has been closed
- The payment was stopped
- There is a problem with the signature
- The cheque exceeds an agreed limit
- Other banking or technical issues
However, not every bounced cheque leads to a legal case under Section 138.
The law requires that there was a legal debt or liability involved for this to happen.
What Should You Do After a Cheque Bounces?
1.
Get the Bank Return Memo
First, get the return memo from your bank.
This tells you why the cheque didn't clear.
Keep the following documents in a safe place:
- The original cheque
- The bank return memo
- Your bank statement
- The deposit slip
- The invoice or agreement
- The loan or transaction documents
- Any relevant WhatsApp messages or emails
- Proof of the unpaid amount
2.
Check Important Dates
Timing is very important when dealing with a bounced cheque.
Under Section 138, the cheque should be presented within six months of the date it was issued, or within the validity period, whichever comes first.
You should not wait too long once you find out the cheque was dishonoured.
3.
Send a Legal Notice
If you meet the legal requirements, you should send a written notice to the person who wrote the cheque.
This notice should be sent within 30 days of receiving the bank's return memo.
The notice should clearly state:
- The cheque number
- The date of the cheque
- The amount
- The date it was presented
- The date it was dishonoured
- The reason for the bounce
- Details about the transaction
- A demand for payment
- The relevant legal requirements
A lawyer can help make sure the notice is accurate and includes all the important details.
4.
The Drawer Has 15 Days to Pay
After the legal notice is sent, the person who wrote the cheque has 15 days to pay the amount.
The Supreme Court has said that legal action under Section 138 can only be taken if the drawer does not make the payment within this time.
If the payment is made within the 15 days, legal action under Section 138 won’t happen.
5.
File a Cheque Bounce Complaint
If the person doesn't pay within 15 days, you can start legal proceedings.
Under Section 142, the complaint should be filed within one month of the date the cause of action arises.
The court can accept a delayed complaint if the person shows that there was a good reason for the delay.
Simple Timeline for a Cheque Bounce Case
Cheque issued
↓
Cheque presented
↓
Cheque bounced
↓
Bank return memo received
↓
Legal notice sent within 30 days
↓
15 days for payment given
↓
No payment
↓
Cause of action arises
↓
Complaint filed within one month
What Is Section 138 of the NI Act?
Section 138 of the Negotiable Instruments Act, 1881 makes certain cheque bounces punishable, but only if certain conditions are met.
The punishment can be:
- Up to 2 years in prison
- A fine up to two times the amount of the cheque
- Or both
This applies only if the cheque was related to a legal debt or a liability.
What Documents Are Needed?
Important documents may include:
- The bounced cheque
- The bank return memo
- Your bank statement
- The legal notice
- Proof of delivery or tracking
- The loan or agreement
- The invoice
- The sale or service documents
- Payment records
- Emails or WhatsApp messages
- Proof of the underlying debt
The exact documents needed depend on the type of transaction.
Can a Security Cheque Lead to Legal Action?
If a cheque is marked as a "security cheque," it doesn’t automatically mean it can be used to file legal action under Section 138.
The court will look at the underlying transaction and determine if there was a legal debt or liability when the cheque became payable.
Therefore, agreements, invoices, account statements and communications can be important evidence in legal cases.
What If You Receive a Cheque Bounce Legal Notice?
If you are the person who issued the cheque and receive a legal notice, do not ignore it.
You should:
Check the details of the cheque
Verify the debt that is being claimed
Check if the payment has already been made
Keep your bank records safe
Review the agreement or transaction that led to the cheque
Seek legal advice
Respond within the proper time frame
Depending on the facts, there may be different legal defences or settlement options.
Can a Cheque Bounce Case Be Settled?
Yes.
Depending on the situation, the parties involved can look into settling the matter during the legal process.
Settlement can include:
Paying the remaining amount
Negotiated agreement
Mediation
Settlement with court help
Written settlement terms
The best way to deal with the case depends on the facts and where the case is in its process.
Where Is a Cheque Bounce Case Filed?
Section 142 sets out where the court has authority for Section 138 proceedings.
Normally, the location is linked to the bank branch where the payee or holder has their account.However, specific situations may affect where the case is filed, so it's important to confirm the right court before starting the process.
Common Mistakes to Avoid
Avoid these mistakes after a cheque bounce:
Waiting too long after the notice period
Losing the original cheque
Not keeping the bank return memo
Failing to save documents related to the debt
Writing a legal notice that is not properly drafted
Missing the time limit for filing a complaint
Thinking that every cheque bounce leads to criminal charges
How Unison Law Offices Can Help
Cheque bounce matters involve strict time limits, legal notices, proof, and court procedures.
Unison Law Offices can help with:
Legal notices for cheque bounce
Proceedings under Section 138
Responding to cheque bounce notices
Complaints regarding dishonour of cheques
Settlement and negotiation
Defending against cheque bounce cases
Legal help for recovering money
Court representation
If you need legal help with a cheque bounce matter, contact Unison Law Offices at +91 98998 32019.
Frequently Asked Questions
1.
What should you do first after a cheque bounce?
Get the bank return memo, save the original cheque and related documents, and check the legal time limits.
2.
How long should a legal notice for a cheque bounce be sent?
The written demand notice should usually be sent within 30 days of the bank informing about the dishonour.
3.
How much time is given for payment after receiving a legal notice?
The drawer has 15 days from receiving the notice to pay the cheque amount.
4.
When should a cheque bounce complaint be filed?
The complaint should usually be filed within one month of the cause of action occurring, subject to any rules about delaying the filing.
5.
What is the maximum punishment for a cheque bounce?
Section 138 provides for imprisonment up to two years, a fine up to twice the cheque amount, or both, depending on the law.
6.
Can a cheque bounce case be settled?
Yes, settlement is possible depending on the facts and the stage of the case.
7.
Can a security cheque lead to a case if it bounces?
It depends on the transaction and whether there was a legally enforceable debt or obligation.
8.
Is a cheque bounce a criminal case?
A case under Section 138 is a criminal proceeding if the legal conditions are met.
9.
Can a recovery case happen along with a cheque bounce case?
Depending on the situation, separate legal remedies for recovering the original debt may be available.
10.
When should you contact a lawyer after a cheque bounce?
It's best to get legal advice soon after receiving the bank return memo because time limits for notice and complaints are very important.