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A cheque bounce occurs when a cheque cannot be processed due to insufficient funds or any technical reason in the drawer’s account. It is governed under Section 138 of the Negotiable Instruments Act, 1881, and is treated as a criminal offence, punishable with imprisonment up to 2 years, or a fine up to twice the cheque amount, or both.

A bounced cheque creates serious financial and legal consequences. Both businesses and individuals rely heavily on cheque transactions, making this an important legal area in financial and commercial dealings.

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The payee or holder in due course is the person to whom the cheque is issued. If the cheque is dishonoured, the payee has legal remedies under the Negotiable Instruments Act.

1. Presentation of Cheque: The cheque must be presented to the bank within 3 months from the date of issue.
    
2. Dishonour of Cheque: If the bank returns the cheque due to “insufficient funds,” “account closed,” or any valid ground, the banker issues a return memo.
    
3. Issuance of Legal Notice: Within 30 days of the cheque being returned, the payee must send a legal demand notice to the drawer demanding payment of the cheque amount within 15 days.
    
4. Filing of Complaint: If the drawer does not pay within 15 days of receiving the notice, the payee can file a criminal complaint in the Magistrate’s Court within 30 days after the expiry of the notice period.
    

• Copy of the dishonoured cheque
   
• Cheque return memo from the bank
   
• Copy of the legal notice served
   
• Postal/courier proof of notice delivery
   
• Affidavit and complaint form
   

• Recovery of cheque amount
   
• Interest and litigation cost
   
• Criminal prosecution of drawer
   

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The drawer is the person who issued the cheque. Once a complaint is filed, the drawer is summoned to appear before the Magistrate and can raise various legal defenses.

1. Cheque Issued as Security: If the cheque was issued only as a security deposit and not against any enforceable liability or debt, this can be a valid defense.
    
2. No Legally Enforceable Debt: Section 138 only applies if the cheque was issued to discharge an existing debt or liability. The accused can argue that there was no such liability.
    
3. Amount Disputed: The accused can contest the amount claimed and provide evidence like bank statements, agreements, or correspondence.
    
4. Cheque Was Stolen or Forged: If the cheque was misused or stolen, the drawer must prove this with an FIR, expert reports, or previous complaints.
    
5. Notice Not Served Properly: If the legal notice was not properly served or received, the complaint may not stand.
    
6. Post-dated or Cancelled Cheque: A cheque issued but later cancelled or intended to be post-dated may offer a valid technical defense.
    

• Bail application
   
• Argument on maintainability
   
• Cross-examination of the complainant
   
• Filing of reply and evidence
   
• Negotiation and settlement during trial
   

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Here’s the step-by-step procedure involved in a cheque bounce case under Section 138 NI Act:

1. Legal Notice: Sent by payee within 30 days of cheque return, demanding payment in 15 days.
    
2. Filing of Complaint: If payment is not made, the payee files a criminal complaint with jurisdictional Magistrate Court.
    
3. Summoning the Accused: The court issues a summons to the drawer based on prima facie review of the complaint.
    
4. Plea Recording: The accused appears and the court records their plea.
    
5. Pre-trial Mediation (New Delhi courts and others): An effort is made to resolve the matter through compromise. If unsuccessful, the trial proceeds.
    
6. Evidence Stage:
    
   • Complainant’s Evidence: Includes affidavit, bank documents, cheque, legal notice, and delivery proof.
      
   • Accused's Evidence: May include documents or witnesses in defense.
      

1. Arguments: Final arguments from both sides are presented.
    
2. Judgment: Court passes the verdict. If convicted, the accused may face imprisonment or fine.
    
3. Appeal: Either party can appeal the judgment in the Sessions Court or High Court.
    

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At Eminence Law Firm, we provide strategic and result-driven legal services for both complainants and accused parties in cheque bounce cases. Whether you’re a business recovering dues or an individual facing wrongful prosecution, our lawyers offer:

• Drafting and sending legal notices
   
• Filing complaints under Section 138 NI Act
   
• Defending false cheque bounce accusations
   
• Negotiation, settlements, and mediation
   
• Trial representation and appeals
   

With years of experience in handling cheque dishonour matters, we combine litigation expertise with a client-focused approach.

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