“Do you know, the first ever Cheque to be issued in India was by the Bengal Bank in the year  1883.”

According to Section 6 of the Negotiable Instruments Act, 1881(“the act”), a bill of exchange which is drawn on a specific banker and further become payable on demand is known as Cheque. It is further termed in electronic as well as truncated forms.

The act, inter alia, defines the numerous terms related to banking. Apart from these, this act is famous for giving sleepless nights to the wilful defaulter Drawer (the person who writes the Cheque) by defining the concept of Cheque bounces u/s 138. 

General Understanding of Section 138 of the Act

“Cheque is bounced when a person (Drawer), to discharge his debts, draws a Cheque from his account, in the favour of another person (Payee) and the same Cheque is returned by the bank unpaid, either due to the reason of the inadequate amount or due to the reason that the Cheque demands an amount that is more than the  Drawer’s entitled limit.  

Responsibility of the Payee 

1. The Payee shall present the Cheque to the bank before the period of six months from the date Cheque is drawn or before its Validity,  whichever is earlier, 

2. The Payee shall, within thirty days from the date of receiving the information from the bank concerning the Cheque unpaid, make a demand, via a written notice, of the said amount from the Drawer.

3. However, if the Drawer makes the required payment within fifteen days from the date of receipt of the notice, the Payee is not entitled to file a Complaint.

One’s Just Deserts

In the case, where a Drawer checks all the requisites mentioned in the definition u/s 138 and the Payee checks all his responsibilities, such Drawer is liable for a punishment of: 

1. two years imprisonment and/or

2. a fine which may not exceed twice the amount of the Cheque drawn.  

Series of Event u/s 138

1. The Payee serves legal notice to the Drawer informing him about the Cheque Bounce within 30 days of receiving information from the bank 

2. The Drawer is provided with a period of fifteen days from the date notice is received to pay the dues or reply to the Legal notice of the Payee.

3. The Payee, on not receiving the dues within fifteen days, can file a Complaint accompanied by the Pre Summoning Evidence against the accused under section 138 of the act. 

4. The next step in the proceeding is the framing of notice followed by the cross-examination of the Complaint.

5. Then comes the most significant stage of the case i.e., the proceedings of Section 313 of the CrPC, where the court informs the accused about the allegation made against him by the Complaint.

6. Later, the accused has to provide a statement in his defence and further has to provide the witness(s) or the document(s) to prove his statement if any.

7. Coming at the later stage, the final arguments are heard and accordingly, the Court announces Judgement.  

Bottom Line

For a wilful defaulter Drawer, It is way easy to discharge the liability rather than facing a criminal proceeding. The Drawers, who issue a faulty Cheque, shall understand that issuing such Cheque(s) is only a temporary escape. Moreover, apart from the above-mentioned punishment, it further invites a lot more problems including but not limited to mental tension, a bad impression in society and unwanted litigation fees.

Contact us at bestlegalservices.in for any cheque bounce related issues.