Filing Procedure of Cheque Bounce Case

Bounced cheques are one of the most common offences plaguing the
financial world and can cause serious humiliation for an individual. Here’s a
step-by-step guide to the legal recourse that is available to a person who has
been handed over a bounced cheque.
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A cheque bounce is when an unpaid cheque is returned back by the bank,

also known as dishonour of cheque. Cheque bounce can eventuate because
of a lot of reasons, for instance, due to insufficiency of funds in the account of
the ‘drawer’ and many other reasons.

The bank always issues a cheque return memo with the necessary reasons
for non- payment as soon as the cheque gets bounced (it may or may not be
the first instance of bouncing of the cheque).
What is a cheque?

A cheque is an exchange bill drawn upon a designated banker which is only

payable on demand by the applicant.

In strict legal sense, the individual/ organisation issuing the cheque is called a
'drawer' and the individual/ organisation in whose favour the cheque has been
issued is called the 'drawee'.

The essential characteristics of a cheque are mentioned as follows:

• Cheque must be in writing

• Cheque has to be an unconditional order
• The Cheque must explicitly specify the Bank
• The payment that has to be made must be directed to an identified
person/ organisation
• Cheque must be payable on demand
• Cheque must be for a specific sum of money
• Cheque must bear clear signatures of the drawer

Different reasons for a cheque bounce

A cheque bounce is dishonour of payment by the drawer towards the drawee

when it is submitted for payment to a bank but does not get paid due to some
or the other reason.
The following are the different reasons for a cheque to get bounced:

• When the signatures on the cheque and the signatures on the official
documents of the bank account like passbook etc. do not match.
• Where there is clear overwriting on the cheque
• When the cheque is presented after the expiry of 3 months (validity of a
cheque), i.e. after the cheque has expired.
• In case the bank account has been closed by the account holder or by
the bank itself.
• When there are insufficient funds in the bank account of the drawer.
• In case payment has been stopped by the account holder i.e. the
drawer.
• When the opening balance in the bank account is insufficient.
• When there is clear inconsistency in the figures and the words
presented on the cheque.
• When there is no seal/ stamp of the company that has issued the
cheque.
• When there is inconsistency in the account number in the cheque.
• When the cheque has been issued from a joint account where
signatures of both the account holders are required but the cheque only
bears one sign.
• In case the drawer or the drawee has died.
• When the drawer has turned insolvent.
• When the drawer has turned insane.
• In case of a crossed cheque (a crossed cheque is when the drawer
specifies a general instruction to the bank in relation to the cheque).
• In case the cheque has been issued against the rules of trust.
 • In case there have been alterations in the cheque.
• In case the bank has doubt in the authenticity of the cheque.
• In case the drawee presents the cheque at the wrong branch of the
bank.
• In case the mentioned cheque amount crosses the limit of the cheque
overdraft (it is the maximum limit that a bank allows its consumers to
withdraw).

How to file a Cheque Bounce case?

In India. a cheque bounce is a criminal offence stipulated under Section-

138 of the Negotiable Instruments Act, 1881. However, in case of a cheque
bounce, the aggrieved party can file a criminal as well as a civil suit against
the accused.

How to institute a cheque bounce case?

In a cheque bounce case, under law, the drawer still has time to resubmit the
same cheque within 3 months from the date of its issue if the drawer feels that
it would not get dishonoured in the future.

The following legal measures can be taken by the drawee of a cheque:

Sending a demand notice (first step towards litigation)

The first step after the cheque has been returned by the bank is not to register
a legal complaint in the Police Station against the drawer (with/ without the
lawyer) but is to send a formal demand legal notice/ letter to the drawer within
the stipulated time of 30 days from the date the cheque was presented and
returned back by the bank to the drawee. The legal notice must insist the
amount (as mentioned in the cheque) from the drawer. The notice must also
mention that if the amount is still not paid within the stipulated time period of
15 days, then appropriate legal action as prescribed under the Negotiable
Instruments Act, 1881 shall be instituted against the drawer.

Since there is no established format for such a notice, it should simply be

demanding and relevant. The notice must explicitly highlight the main
objective of the notice that is to demand payment from the drawer while
informing and warning the drawer of the legal consequences that might result
due to non- payment of the pending amount. The drawee must preserve the
delivery proof of the notice like the postal receipt/ online status of the notice.

The said demand notice can be sent by the drawee himself, however, it is
advisable to seek help from an expert cheque bounce lawyer to draft such a
notice to be sure about the legal language and to ensure the notice leaves a
fearing impact on the drawer against his breach of trust.

What must be clearly stated in the demand notice by the drawee?

The drawee must clearly provide instances of the default and breach of trust
committed by the drawer.

The following are the key points to remember:

• The first thing is to state that the cheque was presented in the bank
within the stipulated time- period
• It must clearly provide the statement of debt as well as drawer’s legal
liability
 • The notice must provide the information provided by the bank on the
dishonour of cheque. A copy of the said cheque could also be enclosed.
• Explicit demand for payments of dues with interest if liable to be paid
within 15 days of receiving the notice.

How to draft a complaint?

A complaint is only affected when the drawer has not replied to the demand
notice within a period of 15 days from the delivery of the notice or has been
delaying payment unnecessarily or has outrightly refused to pay the amount.
A complaint is to be filed in the court which would have the jurisdiction over
the dispute within the prescribed time limit of 30 days (from the date of receipt
of the demand notice by the drawer).

It is pertinent to understand which court the drawee should approach in a

cheque bounce case. The drawee can register the complaint in a court
within whose local limits of jurisdiction any of the following incidents
may have arisen:

• Place where the cheque was drawn

• Place where the cheque was presented
• Place where bank returned the cheque
• Place where the notice of demand of payment was served by the
drawee

The drawee must have all the important documents before registering
the complaint, for instance,
 • Photocopies of the cheque returned by the bank, memo, copy of the
legal notice for demand sent to the drawer and the acknowledgment
slips/ receipts
• Written complaint
• Letter of oath

What is the structure of payment of court process fees to file a cheque bounce
case?

Every litigation process requires payment of court fees. Similarly, while filing a
cheque bounce complaint, the drawee (complainant) has to pay a standard
amount of court fees which varies case to case and entirely depends on the
cheque amount against which the complaint is being filed in the court.

The standard court fee structure varies for different cheque amounts
which is mentioned below:

Cheque Amount Court Fee

Rs. 0 to 50,000/- Rs. 200/-

Rs. 50,000/- to 2,00,000/- Rs. 500/-
Above Rs. 2,00,000/- Rs. 1000/-

When is court notice sent to the accused?

Once the complaint is filed by the drawee (complainant), the court issues
summons to the drawer (accused person) who has failed to make payment
and furnished an irregular cheque.
What is the relevant evidence in a cheque bounce case?

It is advisable to prepare the cheque bounce complaint with the help/

assistance of an expert cheque bounce lawyer. The complaint must forward
all the important/ useful evidence like the original cheque that was returned by
the bank, the cheque return memo, demand notice sent against non-payment/
cheque bounce, receipts of legal notice and any other relevant document that
can be used as evidence to support one’s legal standing that the accused is
liable to pay the un-paid amount with interest as deemed fit by the court for all
the mental and physical trauma caused due to court procedure.

What can be the penalty and punishment for an accused in a cheque bounce
case?

Once the entire trial is over and if the accused is found guilty, then he can be
punished with a monetary penalty which can be double the cheque amount or
be punished with imprisonment which may extend to 2 years or even both.

What is the Memo of Advocate (MoA) and how is it essential during a court
procedure?

An MoA is relevant since it is the official/ legal document authorising the

advocate to appear in the court for his client as per his instructions. An MoA is
popularly known as Vakalatnama in India. The vakalatnama must be
presented on the first date of hearing/ filing of the complaint with the
signatures of the complainant who is the client of the advocate.

• As soon as the case is filed and accepted in the court, each and every
document is cross- checked by the Judicial Magistrate First Class, as a
result, all the original documents like the original cheque (that was
 retuned back by the bank), original memo, a copy of the legal notice,
receipts from the post office, receipts of Universal Product Code (UPC),
acknowledgement receipts, are all needed during the time of cross-
checking the documents.
• Besides the documents, the limitation period to file the suit is also
validated.
• Moreover, the Process Form which is popularly known as the Bhatta, is
filed by the drawee (complainant) himself or by his lawyer, along with
the address of drawer (accused)
• The next step is for the court to issue summons to the accused for him
to appear in the court on a specified date to be decided by the court.
• In case the accused fails to appear in the court on the desired date of
hearing, the court has complete authority to issue a bailable warrant
against him if requested by the complainant.
• And in case the accused again fails to appear before the court, the court
in all probability will issue a non- bailable warrant of arrest against him.

What is the procedure to file a civil suit after a cheque bounce?

An aggrieved drawee has an option to separately file a civil suit when advised
by his lawyer to recover the due amount from the drawer after a tedious legal
battle to recover money. A civil suit can help the complainant recover the due
amount as well as the costs that he has borne during the litigation. As a result,
a summary suit under Order- 37 of the Code of Civil Procedure, 1908 can be
utilized to recover the due amount

A summary suit is unique which is contrary to an ordinary suit. A summary suit

or the summary procedure is provided under Order XXXVII of Code of Civil
Procedure, 1908 where right to defend himself is not provided to the accused
rather, the accused needs permission from the court to defend himself.

However, legal utilization of summary suits can only be utilized in recovery

matters, be it cheques, promissory notes or bills of exchange (wherever there
was written contract to make payment).

What are the key things to remember in a cheque bounce case?

• The Magistrate may only let off the delay in filing a cheque bounce
complaint i.e. after the expiry of 30 days during extraordinary
circumstances (legitimate reasons).
• Section- 138 of the Negotiable Instruments Act also covers dishonour of
a cheque due to stop payment.
• In case the cheque has been presented after the request of the drawer
(accused) after the legal notice demanding payment has been sent and
the resulting dishonour of cheque will not mean that the time- limit under
the legal notice has increased for the accused.
• Any dishonoured cheque that was issued as a gift or donation or any
other obligation, shall not be covered under Section- 138 of the NI Act.
So for this legal provision to apply or be utilized the cheque must carry a
legal obligation.
• The limitation period of a cheque is 3 months from the date on which it
was issued by the drawer.

What are the various consequences of a cheque bounce?

A cheque bounce offence is undoubtedly one of the most common financial

offences across the globe and India is no stranger to these even when a
cheque bounce case can cause terrible repercussions to the drawer of the
cheque.

The following are a few ways via which a cheque bounce can affect the cheque drawer:

• Penalty from the bank - In case a cheque bounce has arisen because
of insufficient funds in the bank account or there has been irregularity in
the signatures or due to some other technical issue as mentioned
earlier, the drawer (accused) and the drawee (complainant) are
imposed with penalties by their respective banks.

This penalty is ordinarily a Non- Sufficient Fee (NSF), i.e. when there are
insufficient funds in the bank account and as a result of that the bank chooses
to bounce the cheque. The fee amount resulting from this is determined by the
grounds and disposition of cheque bounce together with the type of bank
account. In addition to this, in case the cheque bounce is with regard to
repayment of a loan, the bank would further penalise with additional late
payment charges due to delay in payment together with the penalty fee.

• Negative influence on the CIBIL score – A CIBIL score is a 3 digit

number, fluctuating between 300 to 900 which is used by banks and
Non- Banking Financial Companies (NBFCs) to determine a
person’s credit suitability and the chances of repayment of the loan
amount on time by that person.

Therefore, a cheque bounce incident can be awful for the financial credit
history of the accused. The tag of a cheque bounce can be extremely
damaging towards the CIBIL score of the accused that he may not be allowed
loan every again by any financial institution. Therefore, to avoid the same and
in order to maintain a beneficial CIBIL score, every person must always
ensure that the cheques that are furnished to anyone never get dishonoured.
Moreover, every person must maintain at least few if not more thousands than
the minimum balance required in the bank account even after the cheque has
been converted into money.

• Civil or Criminal action against the drawer (accused) - A

dishonoured cheque in all probability can result in both a civil as well as
a criminal lawsuit against the drawer if the drawee (complainant) does
not receive the payment that was initially promised.

An aggrieved drawee (potential complainant) who has been on the receiving

end of a cheque bounce has 2 options available to him for lawsuits. First, to
file a lawsuit under Section- 138 (cheque bounce) of the Negotiable
Instruments Act, 1881 or second, a lawsuit under Section- 420 (cheating and
dishonesty) of the Indian Penal Code, 1860.

Now, in case a lawsuit against the drawer is filed for cheating under Section-
420 of the IPC, the court can issue a non- bailable warrant against the drawer
of the cheque. Although, to institute a lawsuit under this section, a case of
cheating and dishonesty needs to be proven against the drawer.

In situations of multiple bouncing of cheques, the law permits to file separate

cases for separate cheques bounced.

• Additional risks due to cheque bouncing – In line with the RBI

guidelines, the banks have been authorised to disallow issuance of
cheque books to any of their customers who have been accused at
 least 4 times against dishonour of cheque for an amount exceeding Rs.
1 crore.

Apart from this, if the bounced cheque is the one issued as an Equated
Monthly Instalment (EMI) towards repayment of the loan amount, then the
bank has the absolute right to send a legal notice to the defaulter as well as to
withdraw money from the defaulter’s active bank account.

What happens when a cheque bounce issue is not resolved?

Cheque bouncing disputes are way more common than any other financial
offences in India that are directly affecting today’s financial ecosystem.
Currently, as per the Supreme Court of India there are more than 40 lakh
cheque bounce cases that are pending.

Besides this, a cheque bounce can result in multiple repercussions for the
drawer as well as the drawee as described earlier, for instance, heavy penalty
from bank, negative influence on the CIBIL score which would ultimately mean
getting blacklisted to obtain any future loans, civil or criminal action against
the drawer (accused) and many more. In addition to this, in incidents where
no legal action has been taken by the drawee against the drawer against
cheque bounce or non- payment of money or cheating and dishonesty within
the stipulated time as per law, the same can result in lack of remedy for the
drawee of the cheque since there is a set limitation period in filing a cheque
bounce case. Therefore, it is critical for the drawee to tackle a cheque bounce
case in order to avoid losing his hard earned money.

How can a lawyer be helpful in a cheque bounce case?

Considering the law and the numerous provisions stipulated under it and
everything that has been mentioned throughout this law guide, a cheque
bounce case in all probability can attract criminal charges against the drawer.
Therefore, it is of paramount importance to hire an expert cheque bounce
lawyer to draft a legal notice, to file a complaint and also to defend an
accused by drafting an appropriate reply to the legal notice/ complaint. Hiring
an expert lawyer can ensure that the person involved is on the correct path
towards getting justice whether the person is the drawer of the cheque or is
the drawee of the same.

The responsibility of lawyer is not just to accumulate the relevant information

for his client in relation to the cheque bounce case but also manage all the
paperwork that allows enough time to focus on his business and other
considerations.

Additionally, an expert cheque bounce lawyer can guide his client towards the
right path before initiating a lawsuit with significant advice on how to tackle
cheque bounce cases owing to years of experience in administering similar
cases in the past.

Above all, an expert cheque bounce lawyer is a past master on the laws
related to cheque bouncing and can therefore, help both an aggrieved person
as well as an accused to nullify crucial errors that may result in causing legal
and/ or financial trauma, which would ultimately be ratified by future legal
proceedings only.

Therefore, hiring an expert cheque bounce lawyer can ensure that the needs
and interests of the accused/ complaint (whoever the client is) are protected
as per the law.