Frequently Asked Questions on Dishonour of Cheque / Cheque Bounce

1. How do I recover money from a cheque bounce case? Advocates in Indore

There are two ways to recover your money from a cheque bounce case viz. i) following the procedure as laid down in Section 138, Negotiable Instruments Act, 1881, or ii) filing a civil suit. Click here to know more about how to recover your money under Section 138, Negotiable Instruments. Advocates in Indore

2. What is the procedure under Section 138 to recover money on dishonour of cheque?

This is a three step procedure laid down under Section 138, Negotiable Instruments Act to recover your money when the cheque gets dishonoured which is Step 1: Sending Demand Notice within one month from the date of dishonour of cheque by bank, Step 2: 15 days time period to the drawer of the cheque for making payment and Step 3: Filing complaint before the JMFC or Metropolitan Magistrate. Advocates in Indore

The detailed procedure can be read here.

3. What is a demand notice or legal notice for dishonour of cheque? Advocates in Indore

A Demand Notice is actually a legal notice sent through an advocate demanding the said amount of money mentioned on the cheque. The notice must contain information such as the drawer who has issued the cheque, the transaction for which the cheque was issued by the drawer, details of the cheque such as cheque number and bank of the account holder, the bank to which the cheque was presented, the date on which cheque was presented and date on which the bank returned the cheque, etc. The notice must be sent within 30 days of the receipt of information by him from the bank regarding the return of the cheque as unpaid. The notice must clearly mention the demand by the payee from the drawer of the amount for which the cheque was issued. Advocates in Indore

4. Who can send notice under Section 138? Advocates in Indore

Only the payee can send demand notice under Section 138. He can do so through a law firm or an advocate. Advocates in Indore

5. Can demand notice under Section 138 be sent after 30 days? Advocates in Indore

No. The time limit provided in Section 138 has to be followed very strictly and therefore, a notice sent after 30 days does not fulfill the requirement prescribed under the provision. However, if you could not send the demand notice within one month and the cheque is within its validity period then you can present the cheque once again before the bank and the new time limit of 30 days for sending the demand notice shall start.

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6. What are the reasons for cheque bounce/dishonour of cheque? Advocates in Indore

A cheque gets dishonoured on different reasons but the most common of them are insufficient funds in the account of the drawer, payments stopped by the drawer, account closed by the drawer before presentation of the cheque, signature of drawer on cheque not matched with signature of drawer in the records of the bank, the cheque amount has exceeded or crossed the limits of the overdraft.

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7. What is a ‘Cheque Return Memo’? Advocates in Indore

It is a document issued by the bank where the cheque was presented which informs the payee that the cheque presented by him was dishonoured. The return memo shall mentions details such as the name of the bank where cheque was presented, depositor name, depositor account number, date on which the cheque was presented, date in which the cheque was returned and most importantly the reason for the return of the cheque.

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8. How much is the court fee for a filing a case for dishonour of cheque under Section 138?

The court fee for complaint under Section 138 is directly depended on the amount of cheque. In Madhya Pradesh the court fee for complaint under Section 138 i.e., for dishonour of cheque is as follows:

Amount of Cheque Court Fee

Less than Rs. 4,000 Rs. 200

Rs. 4,000 to Rs. 1,00,000 5% of the amount of cheque

Rs. 1,00,000 – Rs. 5,00,000 5% on Rs. 1,00,000 + 4% of the remaining amount

More than Rs. 5,00,000 5% on Rs. 1,00,000 + 4% on the next Rs. 4,00,000 +

3% of remaining amount while maximum being

Rs. 1,50,000

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9. Is cheque bounce a criminal offence? Is proceeding under Section 138 criminal proceeding?

Although proceedings under Section 138 are civil proceedings, proceedings under Sec. 138 can be called a "civil sheep" in a "criminal wolf's clothing. Proceedings under 138 are meant to ensure payment of money and the threat of jail is only a mode to ensure recovery.

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10. Can we get bail in case of dishonour of cheque? Advocates in Indore

Yes. Offence of dishonour of cheque is a bailable offence and therefore, you can get bail easily as a matter of right from the trial court.

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11. How do I get bail in a cheque bounce case? Advocates in Indore

Offence of dishonour of cheque is a bailable offence and therefore, you can get bail easily as a matter of right from the trial court under Section 436 Cr.P.C.

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12. What is the maximum amount of punishment for the offence of dishonour of cheque/cheque bounce under section 138? Advocates in Indore

The offence of dishonour of cheque under Section 138 is punishable with imprisonment for a term which may be extended to two years or with fine which may extend to twice the amount of the cheque, or with both.

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13. Do I have to pay if a cheque bounces? Advocates in Indore

Yes. If a cheque issued by you gets dishonoured, then you have to pay the amount of the cheque within 15 days once the demand notice under Section 138 sent by the payee is received by you. If you have valid reasons and therefore, do not wish to pay, then you can contest the case which the payee of the cheque is going to file against you.

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14. Can complaint filed under Section 138 be withdrawn? Advocates in Indore

Yes. Under Sec. 200 of Cr. P.C, one can withdraw the complaint filed by him under Section 138, Negotiable Instruments Act anytime and at any stage of the proceeding.

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15. Can police lodge FIR in cheque bounce case? Advocates in Indore

No. The police will not lodge the FIR for offence of dishonour of cheque. However, one can lodge the FIR for offence of Cheating.

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16. Can a dishonoured/bounced cheque be deposited again? Advocates in Indore

Yes. A bounced cheque can be deposited again within the period of its validity.

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17. What is period of validity of a cheque? Advocates in Indore

Cheque validity period is a time period within which the cheque is considered a valid negotiable instrument for transaction. Once the validity period ends, the cheque will be considered invalid. As per RBI, a cheque shall have validity of 3 months from its date.

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18. How many times a cheque can be presented and returned? Advocates in Indore

There is no fixed limit for presenting a cheque before the bank. You can present a dishonoured cheque multiple times within the period of its validity. This is usually done when the cheque is dishonoured first time for insufficient fund and the drawer of the cheque deposited the sufficient amount in its bank account after such dishonour.

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19. Can a dishonoured/bounced cheque be cleared? Advocates in Indore

Yes, if the cheque gets dishonoured for insufficient funds and the drawer deposits the required sum in his account then on presenting the cheque again would be cleared by the bank.

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20. How long does it take to get the court Judgement on a cheque bounce case in India?

The Negotiable Instruments Act, 1881 prescribes that case of dishonour of cheque should be completed within six months. However, considering the workloads on courts, these cases are taking 3-4 years to complete while it may go upto 6-7 years for some. Most of the cases are end up in settlement and they get withdrawn anytime and therefore, end of a case under Section 138 depends on case to case.

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