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Cheque Bounce Notice

10 Nov 2020 12:00 AM

A cheque is a bill of exchange which is payable on demand. There are two parties in a transaction, the person who issues the cheque is known as the drawer, whereas the person under whose favour the cheque is issued is known as the drawee. A cheque bounce is a situation in which the cheque cannot be processed because of the insufficient funds that are available in an individual’s bank account. There are many reasons which can lead to a cheque bounce. To overcome such scenarios, the drawee issues a cheque bounce notice or a demand notice to the drawer.

The Cheque bounce notice states that if the amount due is not paid within the prescribed time, and then the drawee will initiate legal proceedings under section 138 of the Negotiable Instruments Act 1881 against the drawer.

According to section 13 of the Negotiable Instruments Act 1881, a negotiable instrument means a bill of exchange, promissory note, or a cheque. The cheques are governed under the Negotiable Instruments Act 1881. Section 138 of the Negotiable Instrument Act 1881 states the provision relating to the dishonour of cheque for insufficiency of funds in the bank account. If there is any cheque issued by the drawer to the drawee to pay any amount and the cheque is returned/dishonoured by the bank because of the insufficient amount in the bank accounts to honour the cheque.

The cheque is also dishonoured if it exceeds the amount that has been arranged to be paid from that bank account (by an agreement made with the bank). Hence, an individual can file a criminal case under section 138 of the Negotiable Instrument Act 1881, and it can also file a Summary suit under Order 37 of the Civil Procedure Code 1908.


Reasons Following are the reasons behind a cheque bounce:?

⦁Insufficient Funds in the drawer’s bank account: The bank dishonours the cheque if there is any shortage/lack of funds in the drawer’s bank account from which the cheque has been issued. In case of insufficient funds in the bank account, the bank will stop the payment. It will also levy a penalty to both drawer and drawee. Insufficient funds are one of the main reasons for cheque bounce cases. To avoid cheque bouncing, the drawer must ensure that there is sufficient balance in his bank account before issuing any cheque.

⦁Signature is mismatched: The bank will dishonour the cheque if the drawer’s signature is mismatched. It has been observed that many times people tend to forget their signature and end up signing a wrong signature on the cheque. If the signature does not match with the bank’s record, it results in cheque bounce. To avoid such situations, the signature of the drawer must match his bank record.

⦁A wrong date mentioned on the cheque: It has been observed that the drawer of the cheque mentions a wrong date in the cheque which results in cheque bounce. Not only the wrong date but if the drawer mentions a date which is more than three months old, then also the cheque is dishonoured by the bank. Moreover, if the cheque is post-dated and the drawee deposits the cheque earlier than the date, it results in cheque bounce. To avoid committing the default of cheque bounce, the drawer must mention the correct date in the cheque.

⦁Overwriting on the cheque: A bank has the authority to dishonour the cheque if the drawer has scribbled or has done overwriting on the cheque. The cheque must be kept in good condition. If the bank finds that the cheque is in a bad condition or is damaged and the details mentioned in the cheque are not clearly/properly visible, then it results in cheque bounce.

⦁The different amount of mentioned in words and numbers sections: The bank dishonours the cheque if there is an unusual amount mentioned in the words and numbers in the cheque. The amounts specified in words must be the same as the amount mentioned under the numerical representation. This common mistake can lead to a cheque bounce. To avoid the cheque bouncing, one must write the same amount in both the sections (words and numbers).


Legal Action

The Cheque bounce is considered a serious offence that is committed by the drawer under section 138 of the Negotiable Instrument Act 1881. The first step is to issue a cheque bounce notice. The drawee issues a cheque bounce notice to the drawer within 15 days from the cheque dishonour. The notice must consist of information relating to the nature of the transaction, the amount specified, the date on which the cheque is deposited, the date on which the cheque is dishonoured, the reason behind cheque bounce and to request the payment of the amount (that was dishonoured by the bank) within 15 days from the receipt of such notice.

The cheque bounce notice must also include the details of the drawer, and it should specify that the cheque was presented within the validity period; it should also specify that the cheque was not given as a loan or a gift but for discharging the debt. If the drawer makes the payment after receiving the cheque bounce notice, then there is no need to file a case against the drawer. If the legal notice is not taken seriously by the drawer, then it may give rise to legal action.

The next step is to file a case if the drawer does not make a payment within the prescribed time. If there is no payment within 15 days by the drawer, then the drawee can file a criminal case within 30 days from the expiry of the cheque bounce notice period (15 days). The case can be filed only in the city where the drawer presented the cheque to the drawee.

After hearing the case, the court will issue summons under section 138 of the Negotiable Instrument Act 1881. Once the summons is issued, the drawer will have to appear before the court for resolving the case.

If the drawer is found guilty, then the penal provision mentioned under section 138 of the Negotiable Instrument Act 1881 will be applied by the Court.


SECTION 143A - POWER TO DIRECT INTERIM COMPENSATION (As per new ammendment of Sec-143A)

The insertion of Sec-143A empowers the court while trying an offence U/S 138 of the NI act, to direct the drawer of the cheque to pay interim comansation to the complainant on two occations:

(a) In a summery trial or summon case, where the drawer pleads not guilty to the accusation made in the complaint and

(b) In any other case, upon framing charges.

The payment of interim measures ensures that the interest of the Complainant is protected in the interim period before the charges are proved against the Drawer. The intent behind this provision is to provide aid to the Complainant during the pendency of the proceedings under Section 138 of the NI Act. The quantum of such interim compensation would be upto 20% of the amount of the cheque. If the Drawer is found guilty under Section 138, the amount of interim compensation would be deductible from the final compensation payable to Complainant. Being equitable, the Section also does not prejudice the Drawer in case of his acquittal by the Court. In such a case, the Court shall order the Complainant to return the amount of interim compensation to the Drawer within a period of 60-90 days along with interest thereon. 


Applicability of Section 143A– Retrospective or Prospective?

The Apex Court in the matter of G.J. Raja Vs. Tejraj Surana[1] faced with the question as to whether Section 143A of the NI Act is retrospective in operation and can be invoked in case where the offence punishable under Section 138 of the NI Act were committed much prior to the introduction of Section 143A. In the said case, it was held that the Section 143A has two dimensions. Firstly, the section creates a liability in as much as a Drawer of the cheque can be directed to pay up to 20% of the cheque amount to the complainant, without being found guilty in the eyes of law. Secondly, the Apex Court also observed that the said section makes available the machinery for recovery, as if the interim compensation were arrears of land revenue. Thus, it not only creates a new disability or an obligation but also exposes the accused to coercive methods of recovery of such interim compensation through the machinery of the State as if the interim compensation represented arrears of land revenue.

The Apex Court held that Section 143A of the NI Act must, therefore, be held to be prospective in nature and confined to cases where offence were committed after the introduction of Section 143A, in order to force an accused to pay such interim compensation.



Section 148 has been introduced in the NI Act, for cases where an appeal is filed against conviction of the drawer under Section 138 of NI Act. It provides that the Appellate Court may order the Appellant to deposit such sum which shall be a minimum of twenty percent of the fine or compensation awarded by the trial court. Further, the same is to be in addition to the payment of interim compensation under Section 143A of the NI Act. This provision is again a welcome step and would give respite the Complainant even if appeal is preferred. This provision would certainly dissuade the drawers from attempting to thrive on prolixity. Under this Section the Court is free to determine the sum payable in the course of the appeal, considering the facts and circumstances of each case.

However, if the appellant is acquitted, then the Court shall direct the complainant to repay the amount to the appellant with interest. The procedure relating to repayment or interim compensation is similar to the procedure as laid down under Section 143 A of the Amended Act.


Applicability of Section 148 – Retrospective or Prospective?

The Supreme Court has clarified that the Section 148 of the Amendment Act, shall have a retrospective effect (applicable to the Complaints filed prior to 1st September 2018) in respect of appeal against the order of conviction and sentence for the offence under Section 138 of the NI Act.

While dealing with the case of Surinder Singh Deshwal @ Col. S.S. Deshwal & Ors.[2] Vs. Virender Gandhi where appeals were filed against a common judgment of the Punjab and Haryana High Court dated 10.09.2019 dismissing 28 petitions filed by the appellants under Section 482 of Cr.P.C, the Apex Court observed that the object and purpose of the enactment of Section 138 of the NI Act was being frustrated because of the delay tactics of drawers of dishonoured cheques by filing of appeals and obtaining stay on proceedings which led to the Parliament to amend Section 148 of the NI Act. It was further observed that the amendment in Section 148 does not take away and/or affect any vested right of appeal of the appellants. The Court held that if such a purposive interpretation is not adopted then the objective and purpose of the Section 148 would be frustrated.



The Supreme Court of India while deciding the G.J. Raja’s[3] has clarified as to why Section 143A is prospective in nature and Section 148 is retrospective in nature, despite of the fact that both the sections were introduced by the Amendment Act 20 of 2018 from 1st September 2018.

The Court noticed that Section 143A of the Amendment Act applies at the trial stage that is even before the pronouncement of guilt or order of conviction. Whereas, Section 148 of the NI Act applies at the appellate stage, where the accused is already found guilty of the offence under Section 138 of the NI Act. The Court also pointed out that there is no provision in Section 148 of the NI Act which is similar to Sub-Section (5) of section 143A of the Act. However, as a matter of fact, no such provision akin to Sub-section (5) of Section 143A was required as Sections 421 and 357 of the Cr.P.C., which apply post-conviction, are adequate to take care of such requirements. In that sense said Section 148 depends upon the existing machinery and principles already in existence and does not create any fresh disability of the nature similar to that created by Section 143A of the NI Act.



The amendments to the NI Act are a great effort aimed at strengthening efficacy and expediency which will help in speedy disposal of cases and also discourage the frivolous and unnecessary litigation. Further, it upholds the interests of the complainant by providing interim compensation and ordering payment by the accused in case of appeal against conviction. The Amendment Act, certainly, a positive step enhancing the credibility of cheques and would give impetus to the trade and commerce.

This article is written by Mr. Parameshwar Bambulge, an Advocate and practising advocate having an experience of 11+ years in handling different legal matters. From his experience he wants to share this beneficial information for the individuals having any issues with respect to their related matters .

For more queries contact:

Mr. Parameshwar Bambulge



Mob: +91 92422 21005

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