Cheque Bounce Case in India: Complete Guide

A cheque bounce case arises when a cheque is returned unpaid by the bank due to reasons like insufficient funds, account closure, or mismatched signature. It is treated as a criminal offence under Section 138 of the Negotiable Instruments Act, 1881 in India. For legal action, the cheque must have been issued for a legitimate debt, presented within three months, and returned unpaid. The payee must send a legal notice within 30 days of the bounce, demanding payment within 15 days. If the drawer fails to pay, a complaint can be filed in the Magistrate Court within one month. Punishment may include up to 2 years‘ imprisonment, fine up to twice the cheque amount, or both. The payee can also file a civil recovery suit. Required documents include the bounced cheque, bank return memo, and copy of the legal notice. This process ensures accountability in financial transactions.

What is a Cheque Bounce?

A cheque bounce (or dishonour of cheque) occurs when a cheque issued by a person is returned by the bank unpaid. The most common reason is insufficient funds in the drawer’s account, but other technical or legal reasons may also apply.

In India, a cheque bounce is not just a financial inconvenience, it’s a criminal offense under Section 138 of the Negotiable Instruments Act, 1881. The law provides both civil and criminal remedies to the payee (recipient) of the cheque.

New Cheque Bounce Rules in India (2025)

To curb delays and misuse, the Indian government and judiciary have implemented reforms. Key highlights include:

• Stricter Penalties

  • Imprisonment increased up to 2 years (earlier up to 1 year in many cases).

  • Fines can now be up to twice the amount of the dishonoured cheque.

• Extended Time Limit for Filing Complaints

  • Previously, complaints had to be filed within 1 month after the cheque bounced. Under new rules, this has been extended to 3 months, giving more time to the payee.

• Online Filing & Digital Evidence

  • Payees can file cheque bounce complaints online.

  • Courts will more formally accept digital evidence, like SMS, email, screenshots, assuming compliance with rules like those under Section 65B of the Indian Evidence Act.

• Mandatory Notification by Banks

  • If a cheque bounces, the bank must inform both the issuer (drawer) and the receiver (payee) via SMS/email within 24 hours, including the reason for dishonour.

• Account Freeze for Habitual Offenders

  • If a bank account has three consecutive cheque bounces, the bank has the power to temporarily freeze that account.

• Uniform Penalty/Procedures Across Banks

  • Rules and penalty slabs are being standardised so that all banks follow similar norms for cheque bounce cases.

• Fast‑Track Resolution

  • There are directives (e.g. from some High Courts) to expedite cheque bounce cases so that they are disposed of faster than under the older slower processes.

Reasons for Cheque Bounce in India

Remedies Against Cheque Bounce

A cheque bounce occurs when a cheque is returned unpaid by the bank due to reasons such as insufficient funds, account closure, or signature mismatch. In India, cheque bounce is treated as a criminal offence under Section 138 of the Negotiable Instruments Act, 1881. If you are a payee facing a cheque bounce, several legal remedies are available to seek redress.

Sending a Legal Notice

The first step is to send a legal demand notice to the drawer within 30 days of receiving the bank’s cheque return memo. The notice must state the cheque details, reason for dishonour, and demand payment within 15 days from the receipt of the notice.

Filing a Criminal Complaint (Section 138 NI Act)

If the drawer fails to make the payment within the 15-day period, you can file a criminal complaint under Section 138 within 30 days from the expiry of the notice period. The complaint must be filed in the jurisdiction of the court where the cheque was deposited (payee’s bank).

Punishment includes:

• Imprisonment up to 2 years

• Fine up to twice the cheque amount, or both

Filing a Civil Suit for Recovery

Along with or instead of a criminal complaint, you may file a civil suit for recovery of the cheque amount, interest, and legal expenses. You can also use summary suit procedures (Order 37 CPC) for faster judgment.

Police Complaint (in Fraud Cases)

In cases involving fraud or cheating, you can file a complaint under Section 420 IPC.

Settlement or Mediation

For faster resolution, out-of-court settlement or mediation may be pursued, especially in small-value matters.

Issuance of Cheque Bounce Notice

When a cheque issued by a drawer is dishonoured or returned unpaid by the bank, the payee must take timely legal action to protect their rights. The first essential step in this process is the issuance of a Cheque Bounce Notice or Legal Demand Notice to the drawer, as mandated under Section 138 of the Negotiable Instruments Act, 1881.

Legal Requirements for Issuance

• Time Limit: The notice must be sent within 30 days from the date the payee receives the cheque return memo (also called the dishonour memo) from the bank.

• Delivery Method: The notice should be sent through registered post with acknowledgement due (RPAD) or speed post to ensure there is proof of delivery. This helps establish that the drawer was informed legally and within time.

• Notice Contents: The notice should clearly include:

  • Details of the dishonoured cheque such as cheque number, date, amount, and bank branch.

  • The reason for dishonour as provided by the bank (e.g., insufficient funds).

  • A demand for the payment of the cheque amount within 15 days from the date the drawer receives the notice.

  • A warning that failure to make payment within the stipulated time will result in legal action under Section 138 of the Negotiable Instruments Act.

Importance of the Notice

Issuing this notice is a mandatory legal requirement before filing a criminal complaint. It gives the drawer an opportunity to settle the debt and avoid prosecution. Failure to send the notice within the prescribed time frame can lead to dismissal of any subsequent cheque bounce complaint by the court.

Procedure for a Cheque Bounce Case in India

A cheque bounce case arises when a cheque issued by the drawer is dishonoured by the bank due to reasons such as insufficient funds, signature mismatch, or account closure. The process to address cheque bounce cases is governed by Section 138 of the Negotiable Instruments Act, 1881, which provides legal remedies to the payee.

Cheque Issuance and Dishonour

The drawer issues a cheque to the payee for repayment of a debt or liability. The payee presents the cheque to the bank within its validity period (typically 3 months from the date of issue). If the cheque is returned unpaid, the bank provides a cheque return memo specifying the reason for dishonour.

Receiving the Cheque Return Memo

The payee receives the cheque return memo from the bank, which confirms the dishonour of the cheque. This memo serves as evidence of the cheque bounce.

Sending a Legal Demand Notice

The payee must send a legal demand notice to the drawer within 30 days of receiving the return memo. This notice should demand payment of the cheque amount within 15 days of the drawer receiving the notice. The notice must be sent via registered post or speed post, ensuring proof of delivery.

Waiting Period for Payment

After the drawer receives the notice, they have 15 days to make the payment. If the payment is made within this period, no further legal action is necessary.

Filing a Criminal Complaint

If the drawer fails to make payment within 15 days, the payee can file a criminal complaint under Section 138. The complaint must be filed within 30 days from the expiry of the 15-day period after the notice was served. The complaint is usually filed in the court having jurisdiction over the place where the cheque was presented for payment.

Court Proceedings and Judgment

The court summons the drawer, and both parties present evidence. If the court finds the drawer guilty, the drawer can face imprisonment for up to 2 years, a fine up to twice the cheque amount, or both.

Settlement or Acquittal

The parties may settle the dispute out of court at any stage, or the court may acquit the accused if there is insufficient evidence.

How to file check bounce case in India

A cheque bounce case occurs when a cheque issued by the drawer is dishonoured by the bank due to reasons like insufficient funds, signature mismatch, or account closure. Filing a cheque bounce case is governed by Section 138 of the Negotiable Instruments Act, 1881, which provides legal remedies to the payee. Here’s a step-by-step guide on how to file such a case:

 Confirm the Cheque Bounce

• When your cheque is returned unpaid, obtain the cheque return memo from your bank.

• The memo will mention the reason for dishonour (e.g., insufficient funds, signature mismatch).

Send a Legal Demand Notice

• Within 30 days of receiving the return memo, send a legal notice to the drawer (the person who issued the cheque).

• The notice should demand payment of the cheque amount within 15 days of receipt of the notice.

• Send the notice via registered post with acknowledgement or speed post to have proof of delivery.

Wait for Payment or Response

• The drawer has 15 days from the date of receiving the notice to make the payment.

• If the drawer pays the amount, no further action is needed.

• If there is no payment or satisfactory response, you can proceed to file a complaint.

File a Criminal Complaint

• File a criminal complaint under Section 138 of the Negotiable Instruments Act in the Magistrate’s court having jurisdiction where the cheque was presented for payment.

• This must be done within 30 days from the expiry of the 15-day period after the legal notice was sent.

Prepare Required Documents

• Cheque (original)

• Cheque return memo from the bank

• Copy of the legal demand notice and postal receipt

• Proof of delivery of the notice

• Any other relevant communication or documents

Court Proceedings

• After filing, the court issues summons to the accused (drawer).

• Both parties appear before the court, present evidence, and arguments are heard.

• If the accused is found guilty, they may be punished with imprisonment (up to 2 years), fine (up to twice the cheque amount), or both.

How to Handle a Cheque Bounce Case?

A cheque bounce case arises when a cheque issued by the drawer is returned unpaid by the bank due to reasons like insufficient funds, signature mismatch, or a closed account. Handling such cases properly is important, whether you are the payee (receiver) or the drawer (issuer). Here’s a step-by-step guide on how to deal with a cheque bounce case effectively.

If  You Are the Payee (Receiver)

1. Obtain the Cheque Return Memo
   When the cheque bounces, immediately obtain the cheque return memo from your bank. This document is essential as it mentions the exact reason why the cheque was dishonoured.

2. Send a Legal Demand Notice
   Under Section 138 of the Negotiable Instruments Act, you must send a legal demand notice to the drawer within 30 days of receiving the return memo. This notice should clearly state the cheque details, the reason for bounce, and demand payment within 15 days of receipt. Send the notice via registered post or speed post to ensure proof of delivery.

3. Wait for Payment or Response
   The drawer has 15 days to make the payment after receiving the notice. If the drawer pays the amount, the issue is resolved amicably. If the drawer ignores the notice or refuses to pay, you can proceed with legal action.

4. File a Complaint in Court
   File a criminal complaint under Section 138 in the appropriate Magistrate’s court within 30 days from the expiry of the 15-day notice period. Submit all relevant documents like the original cheque, return memo, copy of the legal notice, and postal receipts.

5. Attend Court Proceedings
   Cooperate with the court process and appear on all hearing dates. Present your evidence clearly to strengthen your case.

If  You Are the Drawer (Issuer)

1. Respond to the Legal Notice
   If you receive a legal demand notice, respond promptly. If the bounce was due to genuine reasons like temporary insufficient funds, communicate openly and arrange payment quickly.

2. Make Payment Within 15 Days
   To avoid legal complications, pay the cheque amount within the stipulated 15 days after receiving the notice.

3. Seek Legal Advice if Disputing
   If you believe the cheque bounce notice is unjustified or there’s a dispute regarding the underlying transaction, consult a lawyer to prepare a proper defense.

4. Cooperate During Court Proceedings
   Attend all court hearings and submit evidence supporting your defense.

Documents Needed for Cheque Bounce Case in India

Filing a cheque bounce case under Section 138 of the Negotiable Instruments Act, 1881 requires certain important documents to establish the facts clearly and support your claim in court. Here’s a detailed list of documents you need to file and pursue a cheque bounce case successfully:

Original Cheque

The original dishonoured cheque is the primary evidence. It proves that the cheque was issued by the drawer for the payment of a debt or liability. Ensure that the cheque is properly signed and dated.

Cheque Return Memo (Dishonour Memo)

This document is issued by the bank when the cheque is returned unpaid. It clearly states the reason for dishonour, such as insufficient funds, signature mismatch, or account closure. The memo is essential to prove that the cheque was indeed bounced.

Legal Demand Notice

The payee must send a legal demand notice to the drawer within 30 days of receiving the cheque return memo. A copy of this notice is crucial when filing the case. The notice demands payment of the cheque amount within 15 days and serves as proof that the drawer was informed about the dishonour.

Proof of Delivery of Legal Notice

Proof that the legal notice was delivered to the drawer is mandatory. This can be the registered post receipt, speed post receipt, or acknowledgment card signed by the drawer. It confirms that the drawer received the demand for payment.

Complaint Petition/Affidavit

This is the formal document filed in the court stating the facts of the case, including cheque details, dishonour details, and the drawer’s failure to pay after the notice.

Identity Proof of the Payee

To establish your identity or the legal entity filing the complaint.

Power of Attorney (if applicable)

If the case is filed through an authorized representative, a power of attorney is needed to show authorization.

Cheque Bounce Case: Section

A cheque bounce case is legally governed by Section 138 of the Negotiable Instruments Act, 1881 in India. This section deals with the dishonour of cheques due to insufficient funds or other reasons, making it a criminal offence to issue a cheque that is returned unpaid.

 Provisions of Section 138:

• Applicability: Section 138 applies when a cheque is issued for the payment of a legally enforceable debt or liability. The cheque must be presented to the bank within its validity period, which is usually three months from the date of issue.

• Dishonour of Cheque: The cheque is dishonoured (bounced) by the bank due to reasons such as insufficient funds, account closure, or any other reason leading to the cheque’s non-payment.

• Notice to Drawer: Once the cheque bounces, the payee must send a legal demand notice to the drawer within 30 days of receiving the cheque return memo from the bank. This notice demands payment of the cheque amount within 15 days of receipt.

• Failure to Pay: If the drawer fails to make the payment within 15 days of receiving the notice, the payee can file a criminal complaint against the drawer under Section 138.

Legal Action for Cheque Bounce Case

Cheque bounce cases are governed by Section 138 of the Negotiable Instruments Act, 1881, which provides a legal remedy to the payee when a cheque issued by the drawer is dishonoured due to insufficient funds or other reasons. Taking legal action properly is essential to protect your rights and recover the payment. Here is a detailed step-by-step guide on the legal action involved in a cheque bounce case:

Cheque Dishonour and Return Memo

When a cheque is presented to the bank for encashment but is returned unpaid (bounced), the bank issues a cheque return memo or dishonour memo stating the reason for non-payment. This document serves as proof of cheque dishonour and is critical for initiating legal action.

Sending a Legal Demand Notice

Under Section 138, the payee must send a legal demand notice to the drawer within 30 days from the date of receiving the cheque return memo. The notice should specify the cheque details, the reason for dishonour, and demand payment of the cheque amount within 15 days from the date the notice is received by the drawer. It must be sent through registered post or speed post to ensure there is proof of delivery.

Waiting for Payment

After the legal notice is sent, the drawer has 15 days to make the payment. If the drawer pays the cheque amount within this period, the matter is resolved without further legal proceedings.

Filing a Criminal Complaint

If the drawer fails to pay within the 15-day notice period, the payee can file a criminal complaint under Section 138 in the Magistrate’s court that has jurisdiction over the place where the cheque was presented for payment. The complaint must be filed within 30 days from the expiry of the 15-day period.

Court Proceedings

Once the complaint is filed, the court issues summons to the drawer, and both parties are heard. The payee presents evidence such as the original cheque, return memo, legal notice, and proof of delivery. The drawer is given an opportunity to defend themselves.

Punishment and Remedies

If the court finds the drawer guilty, the punishment under Section 138 includes:

• Imprisonment: Up to 2 years, or

• Fine: Up to twice the cheque amount, or

• Both imprisonment and fine.

Settlement and Appeals

The parties can settle the matter amicably anytime before the final judgment. Either party can also appeal the decision in a higher court.

Punishment for Cheque Bounce Case

A cheque bounce case in India is treated as a criminal offence under Section 138 of the Negotiable Instruments Act, 1881. The law aims to ensure the credibility of financial transactions carried out through cheques. When a cheque is dishonoured due to reasons such as insufficient funds, account closure, or signature mismatch, the payee has the legal right to initiate proceedings against the drawer (issuer) of the cheque.

Legal Consequences and Punishment:

Imprisonment

If the court finds the drawer guilty under Section 138, the punishment can include imprisonment for a term which may extend up to two years. The imprisonment is meant to act as a deterrent against the misuse of cheques and to protect the financial interests of the payee.

Fine

Apart from imprisonment, the court may impose a monetary fine, which can be up to twice the amount of the bounced cheque. For example, if the dishonoured cheque was for ₹1,00,000, the fine could go up to ₹2,00,000.

Both Imprisonment and Fine

In many cases, especially where the drawer shows no intent to repay or cooperate, the court may impose both imprisonment and a fine to ensure justice is served.

Additional Consequences:

• Issuance of Warrant: If the accused fails to appear in court, the court may issue a bailable or non-bailable warrant against them.

• Criminal Record: A conviction under Section 138 results in a criminal record, which can damage a person’s reputation and limit business or employment opportunities.

• Attachment of Property: The court may also order the attachment of the drawer’s property if the compensation or fine remains unpaid.

• Corporate Liability (Section 141): If the cheque is issued by a company, the directors or responsible officers may also be held criminally liable.

Compounding of Offence (Section 147):

Cheque bounce cases are compoundable, meaning they can be settled out of court with mutual agreement. If the drawer pays the full amount (sometimes with interest or penalty), the case can be withdrawn with the court’s permission, avoiding conviction.

Cheque Bounce Charges in India

A cheque bounce occurs when a cheque issued by the drawer is returned unpaid by the bank due to various reasons, most commonly insufficient funds, signature mismatch, or account closure. When this happens, it results not only in inconvenience but also in financial penalties and possible legal consequences for the person who issued the cheque. In India, cheque bounce charges are imposed by banks and may also extend to legal costs if the matter escalates.

Bank Charges for Cheque Bounce

Banks impose a penalty on both the drawer (issuer of the cheque) and sometimes on the payee (recipient of the cheque) if the cheque is dishonoured.

Common Bank Charges:

• Drawer’s Charges:
  When the cheque is returned unpaid, the drawer’s bank deducts a fee from their account.
   Charges typically range from ₹150 to ₹750 per cheque, depending on the bank and account type.

• Payee’s Charges:
  In some cases, the payee’s bank may also impose a nominal charge when a bounced cheque is deposited into their account.
   Charges may range from ₹100 to ₹300 per cheque.

Note: These charges are subject to GST (currently 18%) and may vary slightly between different banks.

Example Charges:

 Legal Charges for Cheque Bounce Cases

If the cheque is not honoured and the payee chooses to take legal action under Section 138 of the Negotiable Instruments Act, 1881, additional charges come into play:

  Legal Expenses May Include:

• Advocate Fees:
  Legal professionals typically charge anywhere between ₹3,000 to ₹25,000 or more depending on the complexity and jurisdiction of the case.

• Court Fees:
  Usually nominal, ranging from ₹50 to ₹500, depending on the state and nature of the claim.

• Legal Notice Charges:
  Before filing a case, a legal demand notice must be sent to the drawer.
  Drafting and sending this notice can cost ₹1,000 to ₹5,000 depending on the advocate.

• Documentation Charges:
  Costs for preparing affidavits, notarization, and photocopies may also apply.

Other Consequences

In addition to financial penalties, the drawer may face the following:

• Criminal Prosecution:
  Imprisonment up to 2 years or fine up to twice the cheque amount, or both (as per Section 138).

• Negative Credit Score:
  Especially if it involves business or loan-linked accounts.

• Civil Suit for Damages:
  The payee may file a civil suit for compensation in addition to the criminal complaint.

Cheque Bounce Case Time Limits

Conclusion

Cheque bounce cases are taken very seriously under Indian law, particularly under Section 138 of the Negotiable Instruments Act, 1881. The legal framework provides a structured process to ensure that the payee has a fair opportunity to recover the amount due through judicial means. A bounced cheque not only causes financial loss but can also damage trust in business and personal transactions.

To protect one’s rights, it is crucial to act within the prescribed legal time limits, presenting the cheque within three months, sending a legal notice within 30 days of dishonour, and filing a complaint within 30 days after the notice period ends. Failure to meet these deadlines may result in the dismissal of the case.

The punishment for cheque bounce can include up to two years of imprisonment, a fine up to twice the cheque amount, or both. Additionally, the case can be compounded (settled out of court), offering a way to resolve the issue amicably.

In conclusion, cheque bounce laws aim to uphold the credibility of financial instruments and ensure timely payments. Whether you’re a payee or drawer, understanding your legal rights and responsibilities is essential to avoid legal trouble and maintain trust in financial dealings.