Cheque bounce cases arise when a cheque issued by an individual or entity is returned by the bank unpaid due to insufficient funds, stop payment instructions, account closure, or other reasons. Such dishonor of cheque constitutes an offense under Section 138 of the Negotiable Instruments Act, 1881. Below is an overview of the typical stages involved in a cheque bounce matter:
Issuance of Cheque:
The process begins when a cheque is issued by the drawer to the payee towards discharge of a legally enforceable debt or liability.
Cheque Presentation:
The payee presents the cheque to the bank for payment within the validity period. If the cheque is dishonored, the bank issues a return memo specifying the reason for non-payment.
Dishonor of Cheque:
Upon dishonor, the payee obtains information from the bank confirming that the cheque has been returned unpaid due to insufficient funds or other reasons.
Statutory Demand Notice:
The payee, through legal counsel, issues a written demand notice to the drawer within 30 days from receipt of return memo, demanding payment of the cheque amount within 15 days.
Non-Payment within Statutory Period:
If the drawer fails to make payment within 15 days of receiving the notice, a cause of action arises for filing a criminal complaint under Section 138.
Filing of Complaint:
The payee may file a complaint before the competent Magistrate Court within one month after the expiry of the statutory notice period.
Summons and Appearance:
Upon satisfaction of prima facie case, the court issues summons to the drawer to appear and respond to the complaint.
Trial Proceedings:
Both parties present their evidence. The complainant must prove existence of debt/liability and dishonor of cheque, while the accused may raise defenses permitted under law.
Judgment:
After hearing both sides, the court pronounces its judgment. If convicted, the accused may face monetary penalties, compensation, and/or imprisonment.
Appeals:
The convicted party has the right to appeal the judgment before higher courts as per legal procedure.