Bouncing of Cheque

Negotiable Instruments Act, 1881

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• Section 138 of the Negotiable
Instruments Act, 1881.

• A cheque is said to be dishonoured when

it is returned unpaid by the bank either
due to :
- insufficiency of funds or
- the amount stated in the cheque exceeds

the amount arranged to be paid from

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• If the Cheque bounces back, what is the
remedy?

• The drawer/Buyer can be prosecuted

under Section 138 of the Negotiable
Instruments Act by the Payee/Supplier.

• Punishment : Imprisonment for a term of

Two years/ fine which may extend to
twice the amount of cheque or both.
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 Conditions to be satisfied
• Cheque is issued to discharge any
liability already accrued.
Eg. cheque given as gift/ donation is not
covered.

• Cheque is presented to the Bank within 3

months from the date of cheque.

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Conditions to be satisfied contd….
• Cheque is returned unpaid by the bank
due to insufficiency of funds in the Bank.

• The Payee or the Holder in due course

has issued a Demand Notice in writing to
the Drawer. Time period: 30 days from
the date of intimation by the banker.

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Conditions to be satisfied contd….
• Supplier must demand payment within 15
days from the date of receipt of Notice.

• If the buyer fails to reply to the notice of

the Supplier or make the payment,
Complaint has to filed within 1 month
from the date of cause of action.( from
15th day)

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• Even if part payment is made by the
Buyer, Supplier can still file the
Complaint.

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• The Drawer / Buyer cannot plead that he
had no reason to believe that the cheque
would be dishonoured.

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• Bouncing of cheque is not a cognizable
offence.

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 Notice
• Notice must be in writing.
• Notice must clearly state that the cheque
is returned unpaid.
• Notice must demand payment within 15
days of its receipt by the Customer.
• Notice to be served by registered post.

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 WHO CAN FILE COMPLAINT ?
• Payee or holder in due course.

• In case of company and firm – authorized

representative.

• Complaint can be filed by Power of

Attorney Holder.

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 Where to file the Complaint?
• Complaint to be filed before a Court not
below the rank of Judicial Magistrate
First Class or Metropolitan Magistrate
Court.

• The Court within whose jurisdiction the

Payee maintains the Bank Account shall
be the Court authority to enquire and
decide the matter.
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 LIABILITY OF DIRECTORS /
PARTNERS
• If the person committing the offence is a
Company , every person who was
responsible for conducting the affairs of
the Company at the time when the
offence was committed shall be guilty of
the offence.

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• Stop Payment of post dated Cheques
amounts to an offence.

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• Besides the remedy under the criminal
law, you can also file a civil suit for
recovery of the amount.
• Both the remedies can be pursued
simultaneously.

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