1. Negotiable Instruments Act, 1881 (Section 138-142)
A cheque bounce is treated as a criminal offense under Section 138 of the Act.
✅ Conditions for Filing a Case Under Section 138:
- The cheque was issued to discharge a legal liability or debt.
- The cheque was presented within 3 months (90 days) from the date on the cheque.
- The bank returns the cheque due to insufficient funds or any other reason.
- A written demand notice is sent by the payee to the drawer within 30 days from the date of cheque bounce.
- If the drawer fails to make the payment within 15 days of receiving the notice, the payee can file a complaint within 30 days after the notice period ends.
✅ Punishment for Cheque Bounce:
- Imprisonment for up to 2 years, or
- Fine up to twice the amount of the cheque, or
- Both imprisonment and fine.
⚖️ 2. Indian Penal Code (IPC), 1860 (Optional in Some Cases)
In certain circumstances, the payee may choose to file a complaint under:
- Section 420 (Cheating)
- Section 406 (Criminal Breach of Trust)
These sections apply if the issuer of the cheque had fraudulent intentions from the beginning.
🕰️ 3. Time Frame for Filing a Cheque Bounce Case
- Cheque must be presented within 3 months of the issue date.
- Legal notice must be sent within 30 days of cheque bounce.
- Complaint must be filed in court within 30 days after the 15-day notice period ends.
⚖️ 4. Jurisdiction for Filing the Case
As per the 2015 amendment, a cheque bounce case can be filed where:
- The payee’s bank is located (where the cheque was presented for clearance).
- Not where the drawer’s bank is located.
💡 5. Recent Amendments and Key Points
- 2018 Amendment: Allowed interim compensation up to 20% of the cheque amount to the payee at the discretion of the court.
- Interim Compensation: Payable within 60 days from the order.
- Appeal Provision: If the accused files an appeal, they must deposit 20% of the amount awarded by the trial court.
📚 6. Civil Remedy for Cheque Bounce
Apart from criminal proceedings, the payee can also initiate a civil suit for recovery of the cheque amount along with interest and damages.