When a cheque is returned unpaid by the bank, the payee may have a remedy under Section 138 of the Negotiable Instruments Act, 1881 (NI Act). The remedy is a criminal complaint, and it runs on strict statutory time limits. The advocates of Aggarwal Associates act for both complainants and accused in cheque bounce matters in Panchkula and Chandigarh. Most disputes turn on the dates, the return memo and the notice. This page explains the process in general terms. Related criminal procedure is explained on the page on the criminal lawyer in Panchkula.
Ingredients of the offence
For an offence under Section 138 to be made out, these elements are generally required:
- the cheque was drawn by the accused on an account maintained by the accused with a bank;
- it was issued to discharge, wholly or partly, a debt or other liability that is legally enforceable;
- it was presented to the bank within its validity period, which is three months from the date on it;
- the bank returned it unpaid, because of insufficient funds or because the amount exceeds the arrangement with the bank (the Supreme Court and the statute have also treated certain other reasons as covered, depending on facts);
- the payee gave a written demand notice within the time allowed;
- the drawer failed to pay within 15 days of receiving the notice.
The Act raises a presumption in favour of the holder under Sections 118 and 139, namely that the cheque was issued for consideration and for a legally enforceable debt. The presumption can be rebutted by the accused through evidence or by the case the complainant's own evidence sets up. The standard for rebuttal is the preponderance of probabilities.
Timeline
| Step | Period |
|---|---|
| Presentation of cheque to the bank | Within the validity of the cheque, which is 3 months from its date |
| Legal notice to the drawer | Within 30 days of receiving information from the bank about the dishonour |
| Time for the drawer to pay | 15 days from receipt of the notice |
| Filing of the complaint | Within one month after the 15 days expire |
The court may take cognizance of a complaint filed after the one-month period if the complainant satisfies it that there was sufficient cause for the delay, as the proviso to Section 142 allows. Condonation is a matter of the court's discretion, and it is not to be assumed.
Jurisdiction: Panchkula or Chandigarh
After the Supreme Court's decision in Dashrath Rupsingh Rathod v. State of Maharashtra (2014), Parliament amended Section 142 in 2015. Under Section 142(2), where the cheque is delivered for collection through an account, the complaint is filed in the court within whose local jurisdiction the branch of the bank where the payee or holder in due course maintains the account is situated. Where the cheque is presented over the counter at the drawee bank, the court of the place where the drawee branch is located has jurisdiction.
The location of the payee's bank branch, rather than where the drawer lives, therefore usually decides the forum. In the tri-city, this matters: a payee whose account is at a Panchkula branch would file at the Judicial Magistrate's court at the District Courts, Sector 1, Panchkula, and a payee whose account is at a Chandigarh branch would file before the court at the District Courts, Sector 43, Chandigarh. Appeals and revisions from these courts lie to the Sessions Court and then to the Punjab & Haryana High Court.
Interim compensation under Section 143A
Under Section 143A, the trial court may direct the drawer to pay the complainant interim compensation of up to 20 per cent of the cheque amount. The direction may be made at the stage of summons for a summary trial or on the plea of not guilty in other cases, and the amount is payable within 60 days, with extension for sufficient cause. If the accused is later acquitted, the complainant may be required to repay the amount with interest, as the section provides.
Appeal and Section 148
A person convicted under Section 138 may appeal. Under Section 148, the appellate court may direct the appellant to deposit a minimum of 20 per cent of the fine or compensation awarded by the trial court, and the deposit may be released to the complainant. The Supreme Court has held that this requirement should ordinarily be followed, unless there are reasons not to, which must be recorded.
Compounding under Section 147
Under Section 147, offences under the NI Act are compoundable, so the parties may settle at any stage with the leave of the court where required. Guidelines from the Supreme Court in Damodar S. Prabhu v. Sayed Babalal H. (2010) deal with costs where compounding takes place late. A settlement is usually recorded in the court and the proceedings are then closed on its terms.
Work of a cheque bounce lawyer in Panchkula for the complainant
- checking the dates of the cheque, the return memo and the notice before any step is taken;
- preparing and sending the legal notice, correctly addressed to the drawer (and, for companies, to those responsible under Section 141);
- drafting the complaint with an affidavit of evidence, and filing it in the right court;
- applying for interim compensation, where appropriate, and following the matter through trial.
For the accused
- examining whether the cheque was presented in time, the notice was valid and the complaint was filed within limitation;
- examining jurisdiction under Section 142(2);
- replying to the notice, and, in the trial, rebutting the statutory presumption through cross-examination or evidence;
- bail, which for this offence is bailable in nature, as described in the page on bail and anticipatory bail;
- settlement, deposit and appeal, where relevant.
The sentence for an offence under Section 138 can extend to imprisonment of up to two years, or a fine of up to twice the cheque amount, or both. The trial is ordinarily summary, and the Act directs the court to try to conclude it within six months, though actual time depends on the court's docket.
Documents usually needed
- the original cheque and the bank's return memo;
- the legal notice, postal receipts, tracking report and acknowledgment, or proof of e-mail service;
- the reply to the notice, if any;
- the document showing the debt or liability: invoice, agreement, ledger, loan record or messages;
- bank statements of the payee showing the account and the deposit of the cheque;
- identity and authority documents, and for a company, a board resolution.
Frequently asked questions
Is a post-dated cheque covered?
Yes, a post-dated cheque is a cheque, and the three-month validity runs from the date on it. It can be presented on or after that date.
What if the notice was not received?
The law treats a notice properly addressed and sent by registered post as served in the ordinary course, and the courts have considered the issue in many decisions. The facts of each case determine the result.
Can a cheque bounce case be filed in Chandigarh for a Panchkula drawer?
It can, if the payee's bank branch where the account is maintained is in Chandigarh, because Section 142(2) fixes jurisdiction by that branch. The drawer's residence does not decide the forum.
Does the complainant have to pay any fee to the court?
Court fee and process fees are payable as prescribed. The amounts depend on the court's rules and are not stated here.
Can the matter be settled after the complaint is filed?
Yes. Section 147 makes the offence compoundable, and the parties can settle at any stage with the permission of the court where it is required.
What if the cheque is dishonoured because the account is closed or the signature differs?
Courts have addressed several such reasons under Section 138, and whether the section applies depends on the reason in the return memo and the case law. An advocate can examine the memo.
Anyone considering a Section 138 notice or reply, or looking for a cheque bounce lawyer in Panchkula or a cheque bounce case in Chandigarh, will find the office address on the contact page. The firm's work across the tri-city is outlined on the page on the lawyer in Chandigarh.
This page is general information, not legal advice. Laws and procedures change; the position in your matter depends on its facts.