🔹 Introduction
SECTION 138 NI ACT – CHEQUE BOUNCE CASES IN INDIA. Section 138 of the Negotiable Instruments Act, 1881 (NI Act) is one of the most powerful legal provisions available to individuals and businesses for recovering money. While a civil recovery suit is also an option, it is often time-consuming and more expensive. In contrast, proceedings under Section 138 provide a faster and more effective remedy because cheque dishonor is treated as a criminal offence.
Cheques are widely used for business transactions, salary payments, loans, rent, and personal dealings. When a cheque bounces due to reasons like insufficient balance, stop-payment instructions, account closure, or mismatched signatures, SECTION 138 NI ACT – CHEQUE BOUNCE CASES IN INDIA is immediately attracted.
A person who genuinely owes a legally enforceable debt should take such proceedings seriously. However, individuals who are falsely implicated without any legal liability need not fear the law, as strong legal defences are available.
🔹 What Is a Cheque?
A cheque is a negotiable instrument used to transfer money, make payments, or discharge a debt.
- Drawer/Payer: Person who issues the cheque
- Payee: Person in whose favour the cheque is issued
- Drawee: The bank on which the cheque is drawn
A cheque can be deposited in the payee’s bank account or even into another person’s account, depending on how it is endorsed.
🔹 Expiry of a Cheque
Cheques in India remain valid for 90 days (3 months) from the date written on the cheque.
Example:
If A issues a cheque to B dated 01.04.2024, then B must deposit it on or before 30.06.2024.
A cheque deposited after 90 days becomes invalid/expired, as per RBI Circular No. RBI/2011-12/251.
🔹 When Does a Cheque Bounce?
A cheque is said to be “dishonored” when it is returned unpaid by the bank.
The bank issues a Return Memo with the specific reason for dishonor, such as:
- Insufficient funds
- Payment stopped by drawer
- Account closed
- Signature mismatch
- Amount overwritten or incorrect
- Technical errors
Dishonour triggers the process under Section 138 NI Act.
🔹 Time Limit for Filing a Cheque Bounce Case
Strict timelines apply:
1️⃣ Within 30 days: Payee must send a legal notice after receiving the return memo.
2️⃣ Within 15 days: Drawer must make the payment after receiving the notice.
3️⃣ If no payment is made: Payee can file the complaint within 30 days after the 15-day period ends.
If this time limit is missed, the court may accept the complaint with a delay condonation application, but only at the court’s discretion.
🔹 Step-by-Step Process of a Cheque Bounce Case
1. Dishonour of Cheque
The process begins when the bank returns the cheque unpaid and issues a return memo. Limitation starts from this date.
2. Legal Notice
The payee must send a legal notice within 30 days, demanding payment within 15 days.
For the drawer:
If you receive a legal notice, contact a lawyer immediately and send a strong reply within 15 days. A well-drafted reply plays a crucial role in your defence.
3. Summons from Court
If the drawer does not pay within 15 days, the payee can file a complaint.
The court, upon taking cognizance, issues a summons requiring the accused to appear.
4. Warrants
If the accused does not appear:
- First: Bailable Warrant (BW)
- Then: Non-Bailable Warrant (NBW)
- Continued non-appearance can lead to Proclamation under Section 82 CrPC
- Non-appearance after proclamation leads to a case under Section 174 IPC
5. Notice Under Section 251 CrPC (Plea Recording)
In NI Act cases, issues are not framed.
Instead, the Magistrate explains the accusation and records the plea of the accused.
6. Complainant’s Evidence
The complainant files Evidence by Affidavit (Examination-in-Chief) and may produce witnesses.
7. Cross-Examination
The accused’s advocate cross-examines the complainant to challenge the case, documents, and credibility.
8. Defence Evidence (If Any)
The accused may lead defence evidence, produce documents, or examine witnesses if required.
9. Final Arguments & Judgment
The court hears both sides and delivers the judgment.
🔹 Defences Available to the Accused
An accused person can take several legal defences, such as:
1. Payment Already Made / Fresh Cheque Issued
The drawer may settle the dues or issue a new cheque.
2. Settlement Through Mediation
Courts encourage settlement at any stage of the proceedings.
3. Blank Cheque Misuse
If the drawer signed a blank cheque and the payee filled details later, it can be challenged if misused.
4. No Legally Enforceable Debt
This is the strongest defence. Examples:
- Cheque issued only as security
- No liability existed on the date of cheque issuance
- Goods/services were never delivered
- Loan was never taken
The burden shifts to the accused to rebut the statutory presumption under Sections 118 and 139 NI Act.
🔹 Punishment for Cheque Bounce
Under Section 138 NI Act, punishment includes:
- Imprisonment up to 2 years, or
- Fine up to twice the cheque amount, or
- Both
All offences under the NI Act are compoundable, meaning they can be settled at any stage, even after conviction.
🔹 Conclusion
Cheque bounce cases can be stressful for both parties. Whether you are filing a case or defending yourself, it is important to understand your rights, timelines, and legal remedies. Proper legal guidance ensures faster and more favourable outcomes.