Cheque bounce under Negotiable Instrument Act

Under Section 138 of Negotiable Instruments Act, 1881, a cheque bounce is a punishable offence attracting fine and can be extended to twice the amount of the cheque or imprisonment for a term not more than two years or both. When the Complainant presents a cheque to the bank for payment, and the cheque is returned with a bank Endorsement stating Insufficient fund or Account closed or Signature differ etc., then the cheque is said to have bounced and the complaint can file a Complaint before jurisdictional court under above said section.

Only for brevity and simple understanding herein below the Complainant means one who received the Cheque and the Respondent means one who gave the cheque.

WHAT ONE CAN DO IF CHEQUE IS BOUNCED?

Once the Cheque gets bounced the Complainant will receive "Endorsement" from his banker stating that the Cheque was returned due to "Insufficient funds" or "Account closed" or "Signature differ" etc., mentioning a reason.

Then the Complainant should issue demand notice/legal notice within 30 days (from the date of Endorsement) to the Respondent by demanding the payment of the said amount of money by giving 15 days time. When the Respondent fails to settle the amount as mentioned in the cheque within 15 days then the Complainant should file a Complaint before Jurisdictional court within 1 month from the lapse of 15 days.

WHAT IF COMPLAINANT FAILS TO FILE A COMPLAINT WITHIN PRESCRIBED TIME ?

The complainant should file an Application to condone the delay under section 5 of the Limitation Act. If the Complainant satisfies the Hon'ble Court that he/she had sufficient cause/ground for not filing the complainant within prescribed time then the Hon'ble court may allow the Complaint.

PROCEDURE OF CHEQUE BOUNCE CASE?

Upon receiving a Complaint, the Hon'ble Court will issue the Summons or Notice to the Respondent.

• SUMMONS After serving the Summons/Notice the Respondent will appear before the court and should take bail from the Hon'ble Court and he can also file for written statement if required.

• PLEA The Hon'ble Court will explain the Respondent about the complaint and ask the Respondent whether he admit the facts mentioned in the Complaint and seek plea from the Court or deny the fact and contest the case.

• CROSS EXAMINATION The Respondent need to file an application u/s 145 (2) of NI Act to cross examine the Complainant (few court's follow this procedure).

• 313 STATEMENT After cross examination of the Complainant, The Hon'ble Court will record the statement from the Accused and the Accused can file Affidavit if required.

• CROSS EXAMINATION The Complainant will cross examine the Accused on the Affidavit filed by the Accused, if Accused didn't file any affidavit or produce any evidence then this stage would be closed.

• ARGUMENT & JUDGEMENT The Hon'ble Court will pass the Judgement after hearing from both side.

HOW TO GET INTERIM COMPENSATION?

On 01.09.2018 a new section was inserted i.e., Sec 143-A "Power to direct interim compensation". If the Complainant wants to get interim compensation then he/she can file an Application under above said Section. When the Respondent plead not guilty in Plea stage, the Hon'ble court after hearing from both side may allow 20% of the amount of the cheque as a interim compensation to the Complainant.

WHEN COURT CAN ACQUIT THE RESPONDENT

• When the Cheque issued by the Respondent towards Charity or Gift

• When the Respondent proves that the said cheque was not issued for clearance of his/her legal liable debt.

• When the Respondent create doubts on complaint.

• If the debt amount was already paid by the Respondent.

IMPORTANT JUDGEMENT'S

1. Basalingappa vs Mudibasappa, The Hon'ble Supreme Court has said in this reportable judgement that the Complainant shall prove his financial capacity if the Accused challenge the Complainant financial status.

2. M/s Kalamani Tex vs P Balasubtamanian. The Hon'ble Supreme Court has said in this reportable judgement that when the Accused admit his signature on blank cheque leaf then it would attract presumption u/s 139 of NI act.

3. Krishan rao vs Shankargouda . It was held that the Accused is not necessary to come in witness box.

4. M/s Meters and Instruments Private Limited & Anr. v. Kanchan Mehta The Hon'ble Supreme Court has directed the Trail court to conduct NI act case as expeditious for disposal of cases.

5. Dashrath Roopsingh Rathod Vs. Stae of Maharashtra & Anr. The Cheque bounce Case to be Instituted at the place where Branch of the Bank on which Cheque was drawn is located.

6. Dalmia Cement (Bharat) Ltd vs M/S.Galaxy Trades & Agencies Ltd. The Hon'ble Supreme court has elucidate the object of section 138 of NI Act.

7. Modi Cements Limited v. Kuchil Kumar Nandi It was held that the Insufficiency of funds at the time of issue of cheque does not by itself create the presumption of dishonesty in issuing the cheque.

8. Jayalakshmi Nataraj vs Jeena & Co. & Geekay Exim (India) Ltd. vs State of Gujarat In both the Hon'ble Court has detailed about Vicarious Liability by the Company under NI Act.

9. Shally M Peter Vs M/s Banyan Projects India Pvt Ltd. Reportable Judgment passed by the Hon'ble High Court of Karnataka " Once case closed via Lok Adalat amount to decree/award; court can't recall the said order and bar under Sec. 362 CrPC will apply" and also stated that the Petitioner/Complaint can file execution for the amount agreed by the Respondent/Accused.

10. Sripati Singh (Since deceased through his son) Vs The State of Jharkhand & Anr. Crml. Apl. 1269-1270/2021 Reportable Judgment passed by the Hon'ble Supreme Court, in this case the Hon'ble Court has upheld that the Dishonour of Security cheque is also punishable u/s 138 of NI Act.

Attention

Dear reader, The content provided herein are solely for information purposes. No advocate/client relationship is created when you access our blog, site or the materials. The information provided herein does not constitute legal or professional advice. It should not be relied upon for such purposes or used as a substitute for legal advice, Individuals are requested to consult your counsels for any legal issues. The content of this blog may not be update time to time hence it is sternly advised to take above content for information purpose only.