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Frequently Asked Questions: On Cheque Bounce Cases

What legal action can be adopted in response to a bounced or dishonoured cheque?

A criminal prosecution under Section 138 of the Negotiable Instruments Act against the drawer of the cheque can be initiated by the payee or holder of the cheque. Also, a civil case for recovery can be simultaneously filed.

What steps must be taken in order to file a criminal complaint against the drawer of the cheque?

First, the cheque's owner (payee) must send a demand notice to the cheque's drawer within 30 days of learning that the cheque was dishonoured from its bank, either directly or through a lawyer, requesting that the cheque's amount be paid within 15 days of receiving the intimation or demand notice. Second, the holder of the check or payee may proceed to file a criminal case in court if the drawer does not make the payment within the specified 15 days following receipt of the notification or demand notice of the dishonour of the cheque.

Which court has the jurisdiction to consider a complaint of cheque dishonour?

In the case of Dasrath Rupsingh Rathod (Crl. Appeal No. 2287 of 2009), The Hon. Supreme Court determined that the Territorial Jurisdiction for Cheque Dishonour is with those Courts, within whose local jurisdiction the offence was committed, i.e., where the cheque is dishonoured by the bank on which it is drawn. Additionally, if the check is delivered to the bank for payment, the complaint should be brought before the court where the drawer keeps his account.

Whether offence under Section 138 of the Negotiable Instruments Act for dishonour of cheque is made out where a cheque that has been supplied simply as security and not as repayment of a loan is dishonoured?

According to the Supreme Court of India, the nature of the transaction will determine whether a post-dated cheque is for "discharge of debt or liability." The Section is attracted and not otherwise if a liability or debt exists on the date of the cheque or if the amount has become lawfully recoverable. Despite the use of the word "security" in the agreement, dishonour of such cheque would be subject to Section 138 of the Act once the loan was disbursed and instalments were due on the date of the cheque in accordance with the arrangement.

Under what conditions is a bounced cheque not considered an offence?

The following situations prevent a bounced cheque from constituting an offence
  1. When a cheque is provided in advance.
  2. When the cheque is used as collateral.
  3. The difference between the amount stated in words and in numbers.
  4. The drawer must certify any changes made to a cheque.
  5. If a damaged cheque is discovered.
  6. When a cheque is submitted to a charitable trust as a gift or donation.

When does a bounced cheque constitute an offence?

First, where a cheque is provided as payment for a debt. Second, the cheque in question is dishonoured due to insufficient funds, an account closure, the drawer stopping the payment, or similar circumstances. Thirdly, despite receiving the demand notice, the cheque's drawer does not pay within 15 days of receiving the notice.

If the cheque amount, along with the assessed charges and interest, is paid, can the court end the cheque bounce proceedings and release the accused?

The Hon'ble Supreme Court of India in the case of M/s Meters and Instruments Pvt. Ltd. v. Kanchan Mehta held that the court has the authority to end the proceedings in accordance with Section 143 of the Negotiable Instrument Act read with Section 258 of the Criminal Procedure Code if the cheque amount, along with interest and costs assessed by the court, are paid by a specific date.

Does the Court have the authority to end a lawsuit involving a bounced cheque without the complainant's permission?

Yes, the Court has the authority to end a lawsuit in a matter involving a bounced cheque without the complainant's permission. The amendment in the year 2002 made the offence compoundable and hence the accused in the first or the second hearing can make an application for compounding of offence in which the court ought to allow the same.

Is it possible to file a single complaint for the dishonour of several cheques?

Yes, a single complaint may be filed for the dishonour of multiple cheques under Section 220 of the Criminal Procedure Code of 1908, although it is preferable to file separate complaints for the dishonour of multiple cheques in accordance with Sections 218 and 219 of the Code of Criminal Procedure.

Can a complaint for cheque dishonour under Section 138 of the Negotiable Instruments Act be amended?

In the case of Oswal Finlease Private Limited v. State of Rajasthan &Anr, the Hon'ble High Court of Rajasthan declared that no individual could be punished for a genuine error; as a result, a complaint under Section 138 of the NI Act can be modified.


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