A cheque bounce case occurs when a cheque, presented for payment, is returned unpaid by the bank due to insufficient funds in the drawer’s account. This is a criminal offense under Section 138 of the Negotiable Instruments Act, 1881, and can result in penalties like fines (up to twice the cheque amount) or imprisonment (up to two years). The payee (the person receiving the cheque) can initiate legal action against the drawer (the person who issued the cheque) after sending a legal notice demanding payment within 15 days.
1. Monetary Threshold for Filing a Case
Under Indian law, particularly the Negotiable Instruments Act, 1881, there is no minimum or maximum amount prescribed for initiating legal proceedings in the event of a bounced cheque. The law is primarily concerned with the dishonour of the cheque itself, not the value it represents. Whether the cheque is for Rs. 500 or Rs. 50 lakhs, the legal framework for redress remains the same.
2. Understanding Section 138: The Offence Defined
Section 138 of the Act criminalizes the dishonour of cheques issued for the discharge of a legally enforceable debt or liability. It provides that if a cheque issued by an individual is returned by the bank due to insufficient funds, account closure, or exceeding arrangement, and the amount was meant to settle a legitimate debt, then such dishonour constitutes an offence.
To establish the offence under Section 138, the following conditions must be met:
- The cheque must be drawn on an account maintained by the drawer.
- It should be issued towards a legally enforceable debt or liability.
- The cheque must be presented within its validity period (usually 3 months from the date of issue).
- It must be returned unpaid by the bank.
- The payee must issue a written demand notice to the drawer within 30 days of receiving the return memo from the bank.
- The drawer fails to make payment within 15 days of receiving the demand notice.
3. Focus on the Act of Dishonour
The critical aspect of the offence is the act of dishonour itself. Indian courts have consistently held that the integrity of financial instruments like cheques must be protected to maintain commercial trust. Therefore, the circumstances surrounding the dishonour—such as willful default or neglect—carry more weight than the monetary value of the cheque.
4. Legal Consequences
If convicted under Section 138, the drawer of the dishonoured cheque faces:
- Imprisonment for up to two years, or
- A fine that may extend to twice the amount of the cheque, or
- Both imprisonment and fine.
In addition, courts may direct the accused to compensate the complainant for the loss incurred. The process is criminal in nature, although it can lead to civil recovery through compensation orders.
5. Jurisdiction to File the Complaint
The jurisdiction for filing a cheque bounce complaint typically lies in the court having authority over the bank branch where the payee presents the cheque for encashment. Following amendments and Supreme Court rulings, particularly in the Dashrath Rupsingh Rathod v. State of Maharashtra case, it has been clarified that jurisdiction is based on the location of the drawee bank (payee’s bank).
6. Recent Developments and Clarifications
- The law has been fine-tuned to reduce undue delay in proceedings and facilitate faster resolution.
- Amendments to the Act now allow for interim compensation to be awarded during the pendency of the case.
- Courts have emphasized the need for cheque transactions to retain their credibility and reliability in business.
Conclusion
To sum up, there is no minimum monetary limit for initiating a cheque bounce case under Section 138 of the Negotiable Instruments Act, 1881. The offence is established based on the act of dishonour and non-payment within the statutory time frame, not the cheque amount. The law aims to uphold the sanctity of cheque-based transactions in commercial dealings and provides strict penalties to discourage misuse.