What are the Legal Rights in Cheque Bounce Cases? By Athulya - May 14, 2019 Last Updated at: Mar 06, 2020 25861 Latest Update On March, 2020 The Supreme Court has recently said that as per the amended Section 148 of the N.I. Act, the accused shall deposit 20 percent of the fine or compensation awarded by the trial court to appeal against the order in a cheque bounce case. What are the Legal Rights in Cheque Bounce Cases? News update: On February, 2020 The Supreme Court has recently said that as per the amended Section 148 of the N.I. Act, the accused shall deposit 20 per cent of the fine or compensation awarded by the trial court to appeal against the order in a cheque bounce case. A bill of exchange which is drawn upon a specified banker and payable on demand is called a cheque. A cheque bounces or is considered to be dishonoured when it is presented for payment, but due to reasons such as – insufficient balance in the account, overwriting, expired validity of the cheque among various others, the cheque cannot be cleared. Cheque bounce cases are some of the most common cases before courts in India with close to 40 lakh cheque bounce cases pending as per reports of the Supreme Court. A cheque bounce happens due to insufficient account balance, expired validity of cheque and overwriting among other reasons. The cases of cheque bounce are quite common that nearly 40 lakh cases are pending, claim Supreme Court reports. Here, you will get to know the legal rights involved in the cheque bounce cases. Section 138 of the Negotiable Instruments Act, 1881 is the primary law in the context of cheque bounce cases. The following is an analysis of the rights and remedies existing in cheque bounce cases- Resubmission of the Cheque Under the cheque bouncing, on being informed, the issuer of the cheque has an opportunity to rectify the error which has caused the cheque bounce and ask the payee to resubmit the cheque for clearance. This can be done within 3 months from the date on which the cheque bounced. The recipient of the cheque is informed by his bank about the bouncing of the cheque through the issue of a “cheque return memo” which contains the reasons for non-payment of the money stated in the cheque. For a person to make a valid claim, such a person must ensure that they submit the cheque to the bank within three months from its date of issue, otherwise, the cheque would expire. Talk to Our Legal Experts Demand Notice If the cheque bounces for the second time, the recipient of the cheque has an option to send a demand notice to the issuer of the cheque. The demand notice usually asks the issuer to transfer the requisite funds within 15 days, failing which the recipient would file a complaint under Section 138 of the Negotiable Instruments Act. This demand notice has to be sent within 30 days of receiving the bounced cheque from the bank. The court may consider a delay if a justifiable reason is provided. Filing a Complaint If the issuer of the cheque has not replied to the demand notice or complied with the terms of the same, the recipient has an option of filing a complaint before the courts within 30 days. Concerning jurisdiction, the courts situated in locations, where the cheque was drawn, where the cheque was presented and/or returned by the bank, have jurisdiction. A complaint under Section 138 can also be filed against a company. It must be noted that cheques which are issued as gifts are not covered by Section 138 of the Negotiable Instruments Act. Under the Complaint being filed and the requisite court fees being deposited with the court, the original documents such as the original cheque, a copy of the notice and acknowledgement receipt are to be verified by the Judicial Magistrate First Class. The complainant would have to appear in court and be examined by the Magistrate. The Magistrate would issue a summons for the issuer of the cheque to appear before the Court and if found guilty then the issuer would be punished with imprisonment or fine under Section 138 of the Negotiable Instruments Act. In addition to pursuing remedies through this method as well as the civil proceedings as demonstrated below, the recipient of such a cheque can also file a complaint about cheating under Section 420 of the Indian Penal Code. You can still file a case for cheque bounce after the period of 30 days if you can provide a reasonable justification for the delay. Usually, the cheque bounce case time limit to send the notice is 30 days. An Alternate Civil Complaint The nature of the complaint as described in the above sections is that of a criminal complaint, which could possibly result in punishment to the defaulter in terms of jail time but often does not result in the recipient of the bounced cheque getting his dues. Thus, it would be prudent for the recipient to file a separate civil suit for the recovery of the amount due to him. This can be done through filing a summary suit under Order 37 of the Code of Civil Procedure, 1908. A summary suit differs from an ordinary civil suit in as much as it does not grant the defendant with a right to defend himself and to be able to defend himself, the defendant has to seek prior permission of the court. Summary suits are only permissible in the context of matters of recovery. Thus, in matters of cheque bounce, a summary suit can be filed for the recovery of money. In addition to the risk that a defaulter faces in terms of jail time or penalty, it is also open to the bank from which the defaulter has issued the cheque to stop the defaulter from using its facilities and to possibly close the account. How to escape a cheque bounce case in India? You can escape a baseless or false cheque bounce case by having a good counsel to represent your objective.