Navigating Cheque Bounce Cases: A Comprehensive Guide to Section 138 of the Negotiable Instruments Act, 1881

How to File a Cheque Bounce Case: A Step-by-Step Guide for the Payee

If you are the payee and the cheque has bounced, here’s a detailed guide on how to file a case:

Step 1: Sending a Legal Demand Notice

This is the most critical initial step. The legal demand notice must be sent to the drawer within 30 days of receiving the cheque return memo from your bank.

● Content of the Notice: The notice should be drafted by a lawyer and must clearly state the following:

○ Details of the dishonored cheque (cheque number, date, amount).

○ The reason for its dishonor as stated in the return memo.

○ The total amount due, including the cheque amount and any other relevant charges.

○ A formal demand for the drawer to pay the amount within 15 days of receiving the notice.

● Method of Sending: The notice should be sent via a reliable and traceable method, such as registered post with acknowledgment due, courier service, or speed post. This ensures you have documentary proof of dispatch and delivery, which is crucial evidence in court.

Step 2: Filing the Complaint in Court

If the drawer fails to make the payment within the 15-day period specified in the notice, you have a window of 30 days from the expiry of that period to file a criminal complaint.

● Jurisdiction: The complaint must be filed in the Magistrate’s Court that has jurisdiction over the location where the cheque was presented for encashment or where the payee’s bank branch is located. The Supreme Court’s ruling in Dashrath Rupsingh Rathod v. State of Maharashtra clarifies that the complaint must be filed where the cheque was presented for payment.

● Required Documents: A meticulously drafted complaint must be filed along with several key documents:

○ The original dishonored cheque.

○ The original cheque return memo issued by the bank.

○ A copy of the legal demand notice.

○ The postal/courier receipt and the acknowledgment card or delivery proof.

○ A sworn affidavit (or examination-in-chief) from the complainant.

● Drafting the Complaint: The complaint should be a well-structured narrative detailing the transaction, issuance of the cheque, its presentation, dishonor and the subsequent sending of the legal notice. It must clearly state the drawer’s failure to pay despite the notice.

Step 3: Court Proceedings and Trial

Once the complaint is filed, the court takes cognizance of the matter.

● Summoning the Accused: If the court is satisfied with the initial evidence, it will issue summons to the drawer (the accused). The drawer is required to appear before the court.

● Plea and Evidence: The drawer will be asked to plead guilty or not guilty. If they plead not guilty, the case proceeds to trial. Both parties present their evidence, which includes documents and witness testimonies.

● Cross-Examination: The lawyers for both sides will cross-examine the witnesses to challenge their credibility and the validity of the evidence.

● Final Arguments and Judgment: After all evidence is presented and arguments are concluded, the court delivers its judgment, either acquitting the accused or convicting them.

How to Defend a Cheque Bounce Case: Key Defenses for the Drawer

If you are the drawer and are facing a Section 138 case, a strong defense strategy is crucial. The law presumes the drawer is guilty until proven otherwise, so the burden of proof is on the accused to rebut this presumption.

Defense 1: Proving Absence of a Legally Enforceable Debt

This is the most potent defense. Section 138 only applies if the cheque was issued to discharge a legally binding debt or liability.

● Security Cheque: Argue that the cheque was given as security for a future transaction or a loan that has not yet matured. The Supreme Court has held that a cheque given as security can be a basis for a Section 138 case if the debt becomes legally enforceable. However, the drawer can argue that the liability did not crystallize.

● Cheque for Gift or Unlawful Transaction: Prove that the cheque was a gift or was related to an illegal or unlawful transaction (e.g gambling debt). Since such a debt is not legally enforceable, a case under Section 138 cannot be sustained.

● Loan Repaid: Provide evidence (e.g. bank statements, receipts) that the debt for which the cheque was issued has already been repaid in full.

Defense 2: Challenging Procedural Flaws

You can argue that the legal procedure was not followed correctly.

● No Legal Demand Notice Received: Argue that you never received the legal demand notice. While a simple denial isn’t enough, evidence of a wrong address, an undelivered notice or a returned postal cover can strengthen this defense.

● Cheque Presented After Validity: Prove that the cheque was presented for payment after its three-month validity period had expired.

● Payment Made Within Notice Period: Show proof (e.g bank transfer details) that the payment was made within the 15-day notice period.

Defense 3: Technical and Factual Challenges

● Signature Forgery: If your signature on the cheque is forged, you can challenge it. This will likely require a forensic expert’s report as evidence.

● Misuse of Blank Cheque: Argue that you gave a blank cheque as a security or for a different purpose and the payee misused it by filling in the details for a different amount. While the law assumes the details were filled with consent, you can present evidence to rebut this.

Defense 4: Challenging Jurisdiction

You can argue that the court where the complaint was filed does not have the territorial jurisdiction to hear the case, based on the principle that the cause of action arises where the cheque was presented.

Legal Ramifications and Penalties

A conviction under Section 138 can lead to serious consequences:

● Imprisonment: A jail term of up to two years.

● Monetary Fine: A fine which can be up to twice the amount of the cheque. This amount is often used to compensate the complainant.

● Compounding the Offence: At any stage of the proceedings, the court can allow the parties to compound the offense. This is a common practice where the drawer pays the cheque amount plus a mutually agreed-upon additional sum to the payee, leading to the case’s withdrawal. This often saves both parties from a prolonged legal battle.

Conclusion :

Navigating a cheque bounce case, whether as a filer or a defender, is a complex process with stringent timelines and procedural requirements. A successful outcome hinges on gathering robust evidence, adhering to legal procedures, and building a strong legal strategy. While the law is designed to protect the payee, it also provides ample opportunities for the drawer to present a valid defense. It is highly advisable to seek guidance from an experienced lawyer who can help you understand the nuances of the law and represent your interests effectively.