Topics on Cheque Bounce that can help for an Informed Decision.

Cheque Bounce: Let’s understand what happens if your cheque bounces!

Cheque bounce happens when the Bank refuses to accept the deposit of a cheque issued to you. There can be numerous reasons for such refusal by the bank. A cheque bounce can lead to a criminal action under the well-known Section 138 of The Negotiable Instruments Act, 1881.

There can be varied reasons for a cheque bounce (also known as “dishonour of cheque”). Most common reason for cheque bounce is insufficient balance in the account from which it has been issued. Apart from that, wrong date, overwriting, signature mismatch and other clerical errors can also be a reason for the bank to dishonour the cheque. With the advent of technology, dishonour of electronic funds have also become inevitable. 

Immediate steps to take when your cheque is dishonoured by bank -

  • Go to the bank & collect your return memo;
  • Keep the return memo safe
  • Contact a lawyer and regret the inconvenience OR,
  • Contact MyAdvo and enjoy trouble-free services!


Seek the help of best cheque bounce lawyers. Drop an email at or call at +91-9027217218.


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Ways of cheque bounce

There can be multiple reasons which cause a cheque to bounce, majority of which are listed below-

  1. Insufficient funds in the account.
  2. Stop payment by the account holder.
  3. Account closed.
  4. Expired cheque i.e. presented after the lapse of 6 months from the date of issue.
  5. Signature not matching.
  6. Overwriting on the cheque.
  7. Disparity in the words and figures on the cheque.
  8. Mismatch in account number
  9. Crossed cheque
  10. Only one sign being there on the cheque of a joint account (signatures of both the account holders required)
  11. In the event of cheque being issued by a company and the same does not have the seal of the company.
  12. Death, Insolvency or Insanity of the customer.
  13. Cheque presented to the wrong branch.
  14. Cheque presented is against the rules of trust.
  15. Doubt in the genuineness of the cheque.
  16. On the direction of the garnishee.
  17. Crossing the Overdraft limit (OD).

Section 138 of the Negotiable Instruments Act, 1881 applies when the cheque bounces due to insufficient funds, signature mismatch, stop payment, account closed, or dishonest intention and not for any other reason(s).

Both the drawer (defaulter) and the payee have to penalty charges to their respective banks for each cheque bounce. However, the payee can only legally sue the drawer, if the cheque was issued towards the discharge of a debt or liability of the drawer towards the payee and not if the cheque was a gift, loan or for some unlawful purpose. 

Thus for example, if a cheque was issued in order to purchase goods or to pay for some services or payment of salary etc. then the person can be prosecuted in the court under this section. If the cheque was received as a gift from a relative/friend, then no action can lie against the payer.

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Know the steps of cheque bounce case

Statistics say that there are around 40 lakh cheque bounce cases pending across courts in India. It becomes pertinent for the common man to be aware of the legal remedy available and the steps to be taken. Here’s a step-by-step guide to the legal recourse available, in the unfortunate event that you get hit by a cheque that has been dishonoured -

Step 1: Obtain the Cheque Return Memo

On receiving a cheque, your first step will be to deposit it in your bank. On being informed that the cheque has been dishonoured, the drawer bank issues and hands you a “Cheque Return Memo” (which states reasons for non-payment) along with the bounced cheque.

Step 2: Send a Demand Notice

Section 138 of the Negotiable Instruments Act, 1881 provides that before proceeding for legal action, you are required to send ademand notice to the drawer within 30 days of receiving the “Cheque Return Memo”, giving him an opportunity, to pay you within 15 days of receiving such Demand Notice.

Step 3: File a Criminal Complaint 

If you don’t receive the payment within 15 days of sending the Demand Notice, you can file a criminal complaint, under Section 138, within 30 days from the date of expiry of the 15 day notice period. The documents you must attach while filing the complaint-

  • An agreement between the parties which involves payment through cheque.
  • The bill/invoice/agreement against which the bounced cheque was presented.
  • Documents providing evidence that you performed your part of the contract.
  • Bounced cheque and the Cheque Return Memo.

CIVIL ACTION : The payee may also initiate a recovery procedure through a recovery suit for debt recovery in a civil court within the relevant area, apart from prosecuting the drawer for criminal offence. 

Step 4: The Trial

Having filed the complaint, the court gives a notice to the drawer to come before the court. On his appearance, proof is produced; witnesses are examined and cross examined by both parties, arguments are made which ultimately result in a decision. The judge decides whether to acquit or convict.

What is the penalty if  convicted?

Conviction could result in to 2 years jail time, fine or both. 

How long does the process take?

It’s the Indian Legal System! Even the simplest of cheque bounce cases take a minimum of 1-2 years. 

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Read about where to file cheque bounce case.

“Jurisdiction” or the place where a case of cheque bounce is to be fought and decided, gains immense significance in disputes involving parties located in different cities. 

In such multi-city transactions there are two banks involved-

  • first, where the cheque is drawn and
  • second, where the person paying holds an account.

Consider the following illustration:

A, living in Mumbai presents a cheque to B, living in Kolkata. B, on depositing the cheque in his bank in Kolkata realises that the cheque has bounced.

According to the erstwhile position of law, the only remedy B had was to travel to Mumbai to file a suit against A. This was highly inconvenient for victims who received multiple cheques drawn from accounts with insufficient funds located in different cities.

A recent amendment introduced under Section 142(2) of the Negotiable Instruments Act, 1881 provides for the following remedies:

  • A cheque bounce case can now only be filed in the court where the payee’s account is located. Thus, in the illustration mentioned above, the case will be filed by B in Kolkata. This resolves the problem of an aggrieved payee, based in one city and fighting a case in another city.
  • Once a case has been filed before a particular Court in the payee’s jurisdiction, all similar cheque bounce cases against the same drawer have to be filed in the same court.

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What remedy do you have if your case is currently pending before a Court in another city?

The lawmakers have taken this into account through Section 142A, of Negotiable Instruments Act, 1881 which transfers all cases pending as on June 15, 2015 to the appropriate jurisdiction. Thus, in our illustration, if B had a case pending in Mumbai, the same would be transferred to an appropriate court in Kolkata.


Method of cheque bounce in case of a NRI

Given the time taken to encash an inter-country cheque (4-5 weeks), most commercial enterprises perform inter-country transactions through wire transfers. However, a number of personal transactions take place through cheque.

Two possible situations that can arise in the context of a person located abroad are-

Situation 1: A, an Indian National is temporarily located abroad

If A is temporarily located abroad and a cheque issued in his name, payable in India, is dishonoured, then what remedy does A have especially if the 30 day limitation period is about to expire?

The Code of Criminal Procedure allows for a Power of Attorney to file a complaint on behalf of A. In such a case, the procedure stipulated under Section 138 of the Negotiable Instruments Act is followed.

Situation 2: B is living abroad and the cheque is drawn in India, payable abroad

If B is living abroad and a cheque issued in his name, by C (living in India) is dishonoured, what remedy is available to B? 

The principles of ‘Private International Law’ come into play. B can file a suit in the Courts situated in his country. If B and C had a contract mentioning the applicable law, then that particular law would apply. If the contract does not specify any applicable laws, then in accordance to Section 134 of the NI Act, the law where the instrument is made, will be applicable.

However, in accordance with Section 135 of the NI Act what constitutes notice and dishonour will be determined by the law of the country where the cheque is payable.

Thus, in the example, B can file a case in his country, where the procedure of notice will be in accordance to the laws of that country. In the absence of a contract, the case will be decided on the basis of Indian law.

Tip: In inter-country transactions, it’s advantageous to go for a wire transfer, which transfers money instantaneously.

Seek legal advice from the best cheque bounce lawyer. Drop an email at or call at +91-9811782573.

Know about the process and method of cheque bounce.

Cheque bouncing is a criminal offence in India under Section 138 of the Negotiable Instrument Act, 1881 (also, the NIA). The consequences of such a case could be imprisonment up to 2 years or refund of twice the amount of the cheque so issued or both. 

The offence of dishonour of cheque is a bailable offence (bail is a matter of right). It is also a compoundable offence and hence, the person complaining can enter into a legal compromise and can agree to drop charges against the payer. 

The offence of cheque bounce under the NIA is also a non-cognizable offence, which essentially means that the police cannot arrest the defaulter, whose cheque bounces, without a warrant. 

In order to be prudent, the defaulter is advised to revert to the Demand Notice sent to them in case of a cheque bounce within the prescribed 15 days time. A response to the Legal Notice within the prescribed time might help the defaulter avoid getting a criminal charge against him. 

The Legal notice sent to the defaulter is the last warning given to amicably settle the matter before the court is approached and a case is filed. Once the case is filed, it turns into a criminal matter and the case is to be fought until resolved. 

Due to the widely popular Digital India scheme, and the recent demonetisation, it is important to discuss what happens when your electronic transfer of funds is dishonoured. Today, when even the local vendors are accepting PayTM transactions, it’s important to know that a dishonour of an Electronic fund is also a criminal offence. 

Everyone is aware about Section 138 of the Negotiable Instruments Act, 1881 and its implications. What most of us don’t know is that there exists a parallel provision under the Payment & Settlement Systems Act, 2007 for dishonour of electronic funds.

Section 25 of Payment & Settlement Systems Act, 2007 provides for situations where an electronic fund transfer is initiated by a person from his own account which is refused or dishonoured due to insufficient funds in the account.

As per the Act, the punishment for the same shall be imprisonment for a term which may extend to two years, or with fine which may extend to twice the amount of the electronic funds transfer, or with both. Both Section 138 of the Negotiable Instruments Act, 1881and Section 25 of the Payment and Settlement Systems Act, 2007 enables the aggrieved to take a criminal action.

The procedural part for filing a complaint is the same as that under Section 138 of the Negotiable Instruments Act, 1881. 

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