A cheque bounce isn’t just a financial setback—it is a legal issue that can lead to both civil and criminal consequences. Under the Negotiable Instruments Act, 1881 (Section 138), dishonor of a cheque due to insufficient funds, stop-payment instructions, or mismatch of signatures is a punishable offense. For someone dealing with a bounced cheque, knowing the step-by-step recovery process is essential.
1. Understanding Cheque Bounce
A cheque is said to have “bounced” when the bank refuses to honor it due to reasons like:
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Insufficient funds in the drawer’s account.
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Mismatch in signature or overwriting.
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Account closure or stop-payment instructions.
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Post-dated or stale cheque.
2. Issuing a Legal Notice
The first legal step is serving a demand notice to the drawer of the cheque.
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Must be issued within 30 days from the date of dishonor.
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Notice should mention cheque details, amount, date of presentation, and reason for dishonor.
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The drawer is given 15 days to make the payment.
3. Filing a Case under Section 138 NI Act
If the drawer fails to pay within the notice period:
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A complaint can be filed before the Magistrate’s Court.
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Must be filed within 30 days from the expiry of the 15-day notice period.
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The case is criminal in nature and can result in imprisonment up to 2 years or fine up to double the cheque amount, or both.
4. Parallel Civil Remedies
Apart from criminal proceedings, the payee can also file a:
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Civil suit for recovery under Order 37 of CPC (summary suit).
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Insolvency proceedings if the default amount qualifies.
This ensures multiple avenues for recovering the money.
5. Court Proceedings & Evidence
To strengthen the case, the complainant must provide:
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Original cheque and return memo from the bank.
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Copy of legal notice and proof of service.
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Relevant transaction documents (invoice, loan agreement, etc.).
6. Settlement & NOC
Many cheque bounce cases are resolved through mutual settlement during mediation or trial.
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Once payment is made, the complainant issues a No Objection Certificate (NOC) or compromise deed.
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The case is withdrawn or disposed of by the court after recording the settlement.
✅ Key Takeaways
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Act swiftly: timelines under Section 138 are strict.
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Keep records: maintain copies of cheque, notice, postal receipts, and bank memos.
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Use both legal routes: criminal complaint for deterrence, civil suit for recovery.
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Aim for settlement: quicker resolution with an NOC saves time and money.
⚖️ Conclusion:
A bounced cheque isn’t the end of the road. From issuing a legal notice to obtaining a No Objection Certificate (NOC) after settlement, the law provides clear steps for recovery. With timely action and proper legal guidance, you can ensure that dishonored cheques don’t lead to dishonored rights.
