Cheque Bounce Case

A cheque bounce occurs when a cheque presented to the bank is not honored and gets returned unpaid due to various reasons — the most common being insufficient funds in the issuer’s account. Legally known as “dishonour of cheque”, it is considered a criminal offence under Section 138 of the Negotiable Instruments Act, 1881 in India.

 What is a Cheque Bounce Case?

When the drawer (issuer) issues a cheque and the bank refuses to process it, returning it unpaid, the situation is termed as a bounced cheque. This not only causes inconvenience but can also lead to legal consequences, including a fine or imprisonment.

 Common Reasons for Cheque Bounce Case

• Insufficient account balance

• Mismatched signature or overwriting

• Post-dated or expired cheque

• Account closed or frozen

• Incorrect details on the cheque

Circumstances of Cheque Bounce Case

A cheque bounce occurs when a cheque cannot be processed by the bank and is returned unpaid to the depositor. While the most common reason is insufficient funds, there are multiple legal and technical circumstances that may lead to the dishonour of a cheque.

 Common Circumstances Leading to Cheque Bounce Case:

1. Insufficient Funds

The most frequent reason — the issuer’s account doesn’t have enough balance to cover the cheque amount.

2. Signature Mismatch

The drawer’s signature on the cheque does not match the one available in bank records, making the cheque invalid.

3. Post-Dated Cheque Presented Early

If a post-dated cheque is submitted before the mentioned date, the bank may refuse to process it.

4. Stale or Expired Cheque

A cheque is valid for 3 months from the date of issue. If deposited after expiry, it will be returned.

5. Overwriting or Alterations on the Cheque

Any overwriting or visible corrections without authentication by the drawer can lead to rejection.

6. Closed or Frozen Account

If the drawer’s bank account has been closed or frozen, the cheque will bounce.

7. Incorrect Account Details

Mistakes in writing the payee’s name, account number, or mismatch in numeric and written amounts can result in dishonour.

8. Payment Stopped by Drawer

If the drawer gives instructions to the bank to stop payment, the cheque will not be cleared.

9. Exceeding Overdraft Limit

In case of an overdraft facility, if the cheque exceeds the allowed limit, it may get bounced.

10. Mismatch in Amount (Words vs. Numbers)

If the amount written in words and numbers doesn't match, the bank may return the cheque.

Remedies Against Cheque Bounce Case

When a cheque bounces, the payee has several legal remedies to recover the amount and seek justice. The law provides a structured process to handle dishonoured cheques under Section 138 of the Negotiable Instruments Act, 1881.

1. Verify the Cheque Bounce

• Obtain the Cheque Return Memo (Bank Memo) from your bank, which states the reason for dishonour.

• Check the reason carefully (e.g., insufficient funds, signature mismatch, etc.).

2. Send a Legal Demand Notice

• Within 30 days of receiving the cheque return memo, send a legal notice to the drawer demanding payment of the cheque amount.

• The notice should specify the amount, cheque details, and the date by which payment is expected (usually 15 days).

3. Wait for Payment or Response

• The drawer has 15 days from the receipt of the notice to make the payment.

• If the drawer pays within this period, the matter is resolved amicably.

4. File a Complaint in Court

• If the drawer fails to pay within 15 days, you can file a criminal complaint in the court within 1 month after the expiry of this period.

• The court can take cognizance and summon the accused.

5. Mediation and Settlement

• Courts may encourage mediation or settlement between parties before proceeding with the trial.

• Settlement can happen any time during the legal process.

6. Criminal Trial and Penalty

• On conviction, the court can impose:

  • Imprisonment up to 2 years, or

  • Fine up to twice the cheque amount, or

  • Both.

7. Civil Suit for Recovery

• In addition to criminal remedies, the payee can file a civil suit for recovery of money.

8. Alternative Dispute Resolution

• Parties can also opt for arbitration or Lok Adalat to settle the dispute faster.

Key Elements of a Cheque Bounce Case Notice:

1. Sender & Receiver Details
   Name and address of the payee and the drawer.

2. Cheque Details
   Date, cheque number, bank name, and amount.

3. Reason for Bounce
   Mention the reason for dishonour as per the bank memo (e.g., insufficient funds).

4. Demand for Payment
   A clear demand for payment of the cheque amount.

5. Time Frame for Payment
   Usually, a 15-day period from the date of receipt of the notice is given.

6. Legal Warning
   Intimation that failure to pay will lead to legal proceedings under Section 138 of the Negotiable Instruments Act.

Timeline for Issuance:

• The notice must be sent within 30 days from the date of receiving the cheque return memo from the bank.

• The drawer must be given at least 15 days to make the payment after receiving the notice.

​​​​​​​How to Handle a Cheque Bounce Case

When faced with a cheque bounce, both the payee and drawer must follow certain legal steps to resolve the matter efficiently and within the framework of the law.

For the Payee (Receiver of Cheque):

1. Obtain Cheque Return Memo

• Immediately get the Cheque Return Memo from your bank stating the reason for dishonour.

2. Verify the Reason

• Confirm the exact reason (e.g., insufficient funds, signature mismatch, etc.).

3. Send Legal Demand Notice

• Within 30 days of receiving the return memo, send a legal demand notice to the drawer demanding payment of the cheque amount.

• The drawer gets 15 days to respond and clear the dues.

4. Wait for Response

• If the drawer pays within the stipulated period, the matter ends.

• If not, proceed to the next step.

5. File Complaint in Court

• File a complaint under Section 138 of the Negotiable Instruments Act within 1 month after the 15-day period lapses.

• Submit all documents as evidence — cheque, bank memo, notice, and proof of delivery.

6. Court Proceedings

• The court may summon the drawer.

• Both parties may be asked to mediate or settle.

• If found guilty, penalties like fines or imprisonment may be imposed.

​​​​​​​Why Choose YKG GLOBAL For Your Cheque Bounce Case?

Handling a cheque bounce case requires precise legal knowledge, prompt action, and strategic expertise. At YKG GLOBAL, we provide comprehensive support and guidance to ensure your rights are protected and you achieve the best possible outcome.

1. Expert Legal Guidance

Our team comprises experienced legal professionals who specialize in Negotiable Instruments Act cases. We understand the nuances of cheque bounce laws and offer clear, step-by-step guidance.

2. Timely & Efficient Action

We ensure all legal notices and court filings are done promptly within the prescribed timelines, minimizing the risk of losing your legal rights.

3. Customized Solutions

Every case is unique. We tailor our approach based on your specific situation, aiming for quick settlement or strong legal defense as required.

4. Complete Documentation Support

From drafting precise legal notices to compiling and organizing all necessary documents, we handle the entire paperwork to keep the process hassle-free.

5. Mediation & Negotiation Expertise

We prioritize amicable resolutions through mediation and negotiations, saving you time, money, and stress where possible.

6. Strong Court Representation

If the case proceeds to litigation, our seasoned lawyers represent you in court, ensuring your interests are vigorously defended.

7. Transparent & Affordable Services

We offer clear pricing with no hidden costs, ensuring you get expert legal assistance within your budget.