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Legal implications of Cheque Bounce in India

A cheque bounces due to several reasons like insufficient balance, expired validity of cheque, torn cheque, overwriting, etc. Section 138 of the Negotiable Instruments Act, 1881 deals with cheque bounce cases and lays down punishment for anyone found guilty of cheque bounce. Let us find out what is cheque bounce & the legal consequences of cheque bounce in India.
Written by:
Abhishek Sahoo
Published on

Dishonor of Cheque

Dishonor of Cheques, or Cheque Bounce, as it is popularly called is considered to take place when the drawer of the negotiable instrument draws a cheque without sufficient funds in the bank account maintained by him. It is considered as a criminal offence under Section 138 of the Negotiable Instruments Act, 1881 with a punishment of up to one year or fine being double the amount of the dishonored cheque or both.

Table of content:

  • Governing Laws on Cheque Bounce

  • Resubmission of the Cheque:

  • Reasons for Cheque Bounce:

  • Elements of a Dishonoured Cheque

  • Demand Notice or the Cheque Bounce Notice

  • Essentials of a Cheque Bounce Notice

  • When to take a Legal Action against the Drawer?

  • Where to file a Cheque Bounce Notice?

  • Documents Required to file a Cheque Bounce Complaint

  • Timeline in a Cheque Bounce Case

  • Civil Proceedings:

  • What is the difference between the Civil Suit and Criminal Complaints in the case of Cheque Bounce?

  • Withdrawal of the Complaint

  • Consequences of the Cheque Bounce

  • What is the Punishment for Cheque Bounce in India?

  • Relevant Cases of the Cheque Bounce

  • Other things to keep in mind about Cheque Bounce Case

  • Frequently Asked Questions

Governing Laws on Cheque Bounce

The following are the laws which govern cheque bounce in India:

  • Negotiable Instruments Act, 1881

  • Criminal Procedure Code, 1973

  • The Criminal Rules of Practice and Circular Orders, 1990

  • Indian Evidence Act, 1872

  • Indian Contract Act, 1872.

  • The Specific Relief Act

  • The Civil Procedure Code (CPc), 1908.

  • The Indian Penal Code, 1860.

  • Indian Limitation Act, 1963

  • Banker’s Book Evidence Act, 1891

  • Bills of Exchange Act, 1882.

  • The Information Technology Act, 2000 (in case of an electronic cheque)

  • The Indian Constitution.

Resubmission of the Cheque:

The first thing to do in the cheque bounce case is that the drawer should deposit the required amount in his bank and request the payee for the resubmission of the cheque. The cheque has to be resubmitted within 3 months from the date on which the cheque was issued.

Reasons for Cheque Bounce:

A cheque can be bounced because of the following reasons.

  1. Insufficient Balance: Not enough balance in the drawer’s account to make the payment.

  2. Signature: The signature of the drawer is absent or unclear or does not seem to match the one in the Bank’s data.

  3. Account Number: The account number is missing on the cheque or not mentioned in an eligible or readable manner.

  4. Amount: The amount provided in the words and figures do not match.

  5. Overwriting: Signature, or amount or other statements have been overwritten in the cheque.

  6. Name: The name of the payee is missing or not mentioned clearly or as has been mentioned in the account details with the bank.

  7. Alterations: Any alterations are done on the cheque that has not been proved or verified by the signature of the payee/drawer.

  8. The non-existence of the account or non-existence of the account holder: If the account has been closed by the drawer before the presentation of the cheque or if the bank receives information regarding death, lunacy, or insolvency of the drawer.

  9. Order by the drawer or court: If the drawer orders the bank to stop the payment of the cheque or the court orders the bank to stop the said payment.


Elements of a Dishonoured Cheque

  • Drawing the cheque

  • Presentation of the cheque to the bank

  • Returning the cheque unpaid by the drawee bank

  • Payment demand notice issued to the drawer of the cheque

  • Failure of the drawer to pay the amount within 15 days of receiving the notice

Demand Notice or the Cheque Bounce Notice

If the cheque presented is bounced or dishonored, the demand notice for the same is to be sent to the payee within 30 days from the date of cheque bounce. This notice gives 15 days to the drawer to deposit the required amount into the bank account. If the drawer fails to comply with the demand notice within 15 days, then a complaint is registered under Section 138 of the NI Act in the magistrate court having jurisdiction for the same.

Format of the Cheque Bounce Notice:

Sample Legal Notice





Legal Notice under Section 138 of Negotiable Instruments Act, 1881 for Dishonour of Cheque.

Dear Mr _____or Mrs ,

        Under the instruction of my Client named ______________, residing at_____________ , Delhi .  I serve on you this ‘Legal Notice’, informing you as follows:-


1.  That, when you had visited my Client’s New Delhi residence in the month of __________, you had issued two cheques, bearing No.__________ and No. drawn on ___________Bank dated___________ and____________, for two amounts of Rs. ___________and Rs.____________ and Rs. _________ i. e. total amount of Rs.__________ in my client’s favour in lieu of the repayment of the friendly loan advanced by my client to you, of against amount of Rs._________ without any interest.


2.  That, my Client, had deposited the said both Cheques in his Account, in the __________ Bank, during the period of its validity on__________, which was returned unpaid to my Client on___________, on account of ‘Insufficient Funds’ in your Bank Account, to meet the demand stated in the aforesaid both Cheques. (Xerox copy of the Memorandum both dated____________ issued by the said Bank, is enclosed for ready reference).


3.  That, it appears that in order to cheat and defraud my client and without any intention on your part to pay my Client, the aforesaid friendly loan of Rs._________, you had deliberately and intentionally issued the aforesaid Cheques, knowingly that it was bound to be dishonored, on account of ‘Insufficient funds’ in your Bank account.


4.  Under the aforesaid facts and circumstances, through this Legal Notice, I on behalf of my client, do hereby call upon you, to pay my Client, the aforesaid amount of Rs.__________ on or before ______________, failing which my client shall initiate legal proceedings for the recovery of the said amount and shall also prosecute you under section 138 of the Negotiable instruments act and you shall be liable for the costs of the proceedings also.


5.  Copy retained.


Unfeigned Regards,



Encls: As above

Under the instruction of my Client



Essentials of a Cheque Bounce Notice

The following are the essentials of a cheque bounce notice.

  • Reason for the dishonoring of the cheque.
  • Information to the payer/issuer to make payment of the substantial amount such as cheque amount, amount number, date and, address of both the parties.
  • A number of cheques issued that are required to be paid to the payee within 15 days from the date of receipt of such notice.

The cheque bounce notice shall be made within 30 days from the date of the return of the cheque. Its one copy of the notice should be retained by the payee and the other copy should be sent to the issuer through a registered post.

When to take a Legal Action against the Drawer?

In case the drawer fails to make the requisite payment within 15 days as prescribed in the cheque bounce notice, the payee can file a complaint against him in the court within 30 days of the expiration of the prescribed 15 days.

Where to file a Cheque Bounce Notice?

The proceedings of the cheque bounce case will be as per the provisions of the summary trial contained in the Code of the Criminal Procedure (CrPC), 1973. If the cause of action arises in metropolitan cities then the case shall be tried by a Metropolitan magistrate and for other cities, a Judicial Magistrate shall try the case.

The complaint in a cheque bounce can be filed either at the place where the payee’s bank is located or the place where the bank of the drawer.

Further the complainant (payee) has to pay a standard amount of court fees depending on the amount of the dishonored cheque. The court fees vary from case to case and depend upon different cheque amounts.

Documents Required to file a Cheque Bounce Complaint

The cheque bounce complaint should be accompanied with supporting documents

  • returned cheque slip gave from the drawee’s bank,

  • legal notice,

  • reply to such legal notice,

  • acknowledgment of the receipt of such notice,

  • invoice,

  • original copy of the bounced cheque

  • any other evidence that deems necessary to the facts of the case.

  • affidavit

  • letter of oath

  • the receipt of the unpaid cheque.

Timeline in a Cheque Bounce Case

There are two recourses in the case of a cheque bounce – Civil and Criminal

Civil: Payee can proceed with the recovery procedure apart from initiating criminal proceedings.

Criminal: Section 138 of NI Act provides the offence to be bailable, compoundable and non-cognizable for imprisonment extendable to 2 years or fine being twice the amount mentioned in the cheque or both.

Criminal Proceedings: Since cheque bounce is a criminal offence, the case falls under the ambit of criminal trial and is supposed to be undergone accordingly with the assistance of relevant laws.

STEP 1: Filing of Complaint

If the court finds there to exist a prima facie case with regard to the dishonor of cheques under Section 138 of NI Act, then the complaint is accepted, and parties are called for opening statements before the Court.

STEP 2: Sworn Statement of Complaint

The complainant is required to appear before the Court and provide the details and relevant evidence in lieu of the case filed by him. If the court is satisfied with the statement and details put forth before the court, a summon is issued to the accused to appear before the Court regarding the same.

STEP 3: Appearance of the Accused

The accused is required to appear before the court. If s/he fails to appear, an arrest warrant shall be issued against the accused. If the accused pleads guilty, the court shall go on to pass the judgment against the accused, if the accused denies the charges, the court shall proceed with serving him the copy of the complaint as move on to commencement of trial.

STEP 4: Criminal Trial

The trial shall have Examination in Chief and Cross-Examination of the Complainant requiring him to give oral evidence or affidavit along with the production of all original and supporting documents in relation to his complaint.

The Accused is required to present his evidence along with his witnesses who can be cross-examined by the complainant. Both parties are required to submit their arguments before the courts. Keeping in mind the facts and circumstances and laws referred to by both the parties, the Court shall then go on to put forth its judgment.

In the case of conviction of the accused, s/he can move a suspension petition of his sentence for a 30-day period and file an appeal before the Sessions Court.

The Trial usually is observed to take around 12-18 months. However, if the matter is put before a Fast Track Court, the matter can be resolved before the 12 months period.

Civil Proceedings:

Though the proceedings provided for cheque bounce is criminal in nature, however, the complainant often needs to file a civil suit for recovery of the dues. One can file a summary suit under O. 37 of the Civil Procedure Code, 1908.

A civil suit can be filed by the payee to recover the amount due to him and the costs s/he bears during the litigation procedure. For this s/he shall resort to the option of the summary suit under Order 37 (XXXVII) of the CPC, 1908 because unlike ordinary suit the drawer here has no right to defend himself rather he needs permission from the court to defend himself.

The case for cheque bounce can be filed against a person as well as a company for making default i.e. if the cheque issued by them is dishonored for the want of insufficient funds in the drawer account or any other reason as given under Section 138 of Negotiable Instruments Act.

Even if a person or a company has taken a loan from the bank and has always made a payment on time but cheque has been bounced for one EMI payment, the banker can file a case of cheque bounce against such person or such company.

What is the difference between the Civil Suit and Criminal Complaints in the case of Cheque Bounce?

The difference between the Civil Suit and Criminal Complaints is that of the procedure of filing the case, the quantum of punishment and the stages of litigation. The criminal complaint is filed for awarding of punishment to the defaulter while the civil suit is filed for the recovery of the amount due.

Withdrawal of the Complaint

The complaint under Section 138 has to be filed within a limited time period of 1 month only else it becomes time-barred. As per Advocate (Dr.) Ashok Dhamija (Advocate, Supreme Court), if the magistrate agrees as to the withdrawal of the complaint then it becomes mandatory to acquit the accused against whom the complaint was made under Section 257 of Cr.P.C. Also, it becomes pertinent to mention that under Section 300 of Cr.P.C. a person acquitted of offence shall not be tried for the same offence twice. 

Consequences of the Cheque Bounce

A cheque bounce case might lead to various consequences like:-

  • Bank Penalty: The bank imposes a penalty in the form of NSF (non-sufficient fee) in case of a cheque bounces due to insufficient funds in the account, mismatch of signatures or any other technical issue. The penalty imposed varies depending upon the type of bank account. Further, if the bounced cheque is for the repayment then the bank imposes a penalty fee plus the late payment charges in case of the delay in the payment. The court fees vary with the case and the cheque amounts.

  • Impact on the CIBIL Score: A CIBIL score carries a three-digit number ranging from 300 to 900 used by the banks and other non-banking financial companies to determine a person’s financial credibility to repay the loan on time. The cheque bounce can cause a negative impact on the CIBIL score of the accused and might create issues while obtaining a loan from the bank in the future.

  • Defaulter by RBI: The RBI (Reserve Bank of India) has issued guidelines to authorize the banks to stop issuing chequebooks to defaulters who have been accused of dishonor of cheques for a minimum four number of times for an amount exceeding Rs. 1 crore.

  • Civil and Criminal Charges: A cheque bounce will lead to a civil suit or a criminal complaint against you by the aggrieved payee. A lawsuit for cheating and dishonesty under Section 420 of the Indian Penal Code, 1860 can also be filed, provided the charge of cheating and dishonesty needs to be proved against the drawer.

What is the Punishment for Cheque Bounce in India?

The punishment for cheque bounce in India is

  • Imprisonment for up to 1 year

  • Fine which may be equal to double the amount of cheque, or

  • Both

However, if the payment has been made by the drawer of the cheque to the person in whose name the cheque was issued within the 15 days of receiving of the cheque bounce notice under section 138 then it will be deemed that no offence has been committed by the drawer and he does not have to face any legal consequences of cheque bounce in India. If the payment is not received by the drawee within the 15 days i.e., cheque bounce notice period then the drawee will proceed to file the cheque forgery case on the basis of cheque bounce memo given by the bank within one month from the end of cheque bounce notice period.

Relevant Cases of the Cheque Bounce

  1. Dashrath Rupsingh Rathore v. State of Maharashtra[1]

The ground rule under Section 138 of the Negotiable Instruments Act was changed to the prosecution of an individual who has presented a cheque which eventually bounced for insufficiency of funds.

In this case, the matter of jurisdiction for filing a criminal complaint under Section 138 was discussed. Earlier a case under Section 138 could be initiated by the holder of the cheque at his place of business or residence only. The court changed this practice and held that a criminal case has to be initiated at the place where the branch of the bank on which the cheque was drawn is located. The retrospective effect of the judgment leads to a major overhaul and interstate transferring of cheque bouncing cases.

  1. Kishan Rao v. Shankargouda[2]

This case deals with the issue of rebuttal against presumption by accused in a cheque bounce case along with the revisional jurisdiction scope of High Courts in such cases.

The order of the High Court passed while exercising revisional jurisdiction, setting aside the conviction order of the accused which was challenged by the Appellant. On failure to produce any oral or documentary evidence during the trial, the Trial Court drew presumption against the accused under Section 139 of the NI Act. On refusal to rebut the presumption by the production of evidence, he was convicted under Section 138 of the Act. A criminal revision was filed in the High Court against such order of the Trial Court. The High Court set aside the conviction and this was challenged by the Appellant in the Supreme Court.

After both issues were argued upon, the court held that the High Court in the exercise of its revisional jurisdiction cannot set an order of the magistrate aside merely on the ground that on such facts and circumstances, another view is possible. Unless the court can establish that the findings of the lower court that lead to its conclusion were perverse or wholly unreasonable or there is a non-consideration of any relevant material, the order cannot be set aside.

In the context of the rebuttal, the court held that only when the accused is able to rebut the presumption or raise doubt as to the existence of the debt and/or liability that such presumption may fail. The accused may adduce evidence to rebut such presumption against him. Mere denial of the existence or knowledge of debt shall not suffice for this purpose.

Other things to keep in mind about Cheque Bounce Case

The cheque must be issued to pay off some debt or liability, and not for any donation or gift. The cheque must be presented to the bank within its validity period of cheque i.e. 3 months from the date mentioned in it. The reason for cheque bounce must be insufficient funds in the bank account of the issuer. Legal notice for cheque bounce must be sent to the issuer to allow him/her to make the payment before filing a cheque bounce case against him/her.

Frequently Asked Questions:

What is a material alteration?

While neither the Indian Contract Act nor the Negotiable Instruments Act defines the term “material alteration”, various cases have dealt with the term extensively. In the case of Nathu Lal v. Gomti Kuar, [(1940) 42 BOMLR 1156] material alteration has been defined as “one which varies the rights, liabilities, or legal position of the parties ascertained by the deed in its original state or otherwise varies the legal effect of the instrument as originally expressed, or reduces to certainty some provision which was originally unascertained and as such void, or may otherwise prejudice the party bound by the deed as originally executed.”

In simpler terms, material alteration is any such alteration made to a cheque without the drawer’s consent, which would alter the nature and legal standing of such cheque. Such alterations include name, amount, date, etc.

How do I defend against a frivolous cheque bounce case?

In the instance of a frivolous complaint being filed, the best strategy is to prepare for it. The first step, being precautionary in nature, would always be collecting all possible evidence that establishes your innocence. To collect the information on the dishonoring from the bank itself can also add to the strategy. Seeking legal assistance in drafting and replying to the legal notice can also clarify your stand on the accusations. And finally, filing a counter case and seeking compensation for the same is also another effective way to get the other party to withdraw a frivolous case against you.

How to file a Cheque bounce Case against companies and firms?

Section 141 of the Negotiable Instruments Act 1881 deals with a cheque dishonoring case when the defaulting or offending party is an artificial entity such as a company instead of an individual. Each individual in charge of the company and its business at the time of the offense shall be directly liable for it. These individuals include the Directors, Secretary, Managers, etc. 

Who pays the penalty for the bounced cheque?

Both the defaulter drawer and the payee are charged by their respective banks if the cheque gets bounced due to an insufficient amount of funds, a signature mismatch or any other technical issue as such.

Will bouncing a Cheque damage my Credit Score?

Since a cheque bouncing incident is not reported to the CIBIL by the bank, the credit score of an individual does not get affected by it unless such becomes a habitual occurrence or is accompanied by instances of delayed payment.

What is the legal action against a Cheque bounce?

The legal recourse that an individual can take in the instance of a cheque bouncing starts with a simple resubmission of the cheque if the holder is confident that the issue does not persist and the cheque will be honored.

The next step is towards litigation which begins by sending a legal notice to the drawer to give s/him a final chance to repay the due amount within a period of 15 days. On failure to pay the amount due within a period of 30 days, a criminal complaint can be filed by the holder under Section 138 of the NI Act. The holder must be mandatorily registered in a magistrate’s court within a month of the notice period’s expiry.

What is the time limit to file a cheque bounce case?

A complaint seeking legal action in a cheque bounce must be filed within one month from the expiry of the 15 days’ notice that was extended to the defaulting party if even despite such notice, the payment due has not been made. Such limitation is prescribed in Section 141 of the Negotiable Instruments Act.

Does cheque bounce affect cibil score?

A cheque bounce does affect and cause damage to the cibil score of the drawer of the cheque.

Can we file an FIR in the cheque bounce case?

By virtue of Section 138 of the Negotiable Instruments Act, a criminal complaint can be filed against the defaulting party in a cheque bouncing case. After the notice period requirement is met, an FIR can be filed for the same.

What is the fee to stop payment on a cheque?

The fee to stop payment on a cheque differs from bank to bank.

How long can you stop payment on a check?

The payment on a cheque can be stopped until it is not cleared by the payee’s bank.

Is Section 138 a bailable offence?

An offence under Section 138 of the Negotiable Instruments Act is a non-cognizable and bailable offence.

What makes a Cheque invalid?

There might be multiple reasons as to render a cheque invalid like:-

  1. Insufficient balance in the bank account to make the payment.
  2. Absence of signature or mismatch.
  3. Absence of account number or it is unclear.
  4. Overwriting on the cheque.
  5. If the bank holder closes his account or has been closed by the bank.
  6. If the validity period of presenting the cheque has expired.
  7. If the amount written in words does not match in figures.
  8. On the death of either the drawer or the drawee.
  9. If the drawer turns insolvent or insane.
  10. Presentation of the cheque in the wrong branch of the respective bank.
  11. A doubt has been raised by the bank regarding the authenticity of the cheque.
  12. In case the amount mentioned on the cheque exceeds the limit of the overdraft.
  13. If the cheque has been damaged in any way.

Is it illegal to bounce a Cheque?

Yes, a cheque bounce might lead to criminal liability in India.

How many times can a returned check be presented for payment?

A bounced cheque can be deposited again upto three times maximum.

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

It can take about 15-18 months minimum for the court to dispose of a cheque bouncing case in India.

Who can send a notice under Section 138?

A payee can send a cheque bounce notice to the drawer under Section 138.

What are the grounds for filing a criminal complaint in a cheque bounce case?

he drawer of the cheque has to make the payment within 30 days on receiving the cheque bounce notice of the unpaid cheque else criminal proceedings can be taken against him.

[1]Criminal Appeal No. 2287 of 2009 (Supreme Court).

[2] Criminal Appeal No.803 of 2018 (Supreme Court).