Legal Notice for Cheque Bounce

Sending or receiving a legal notice for cheque bounce is a crucial step before initiating litigation. Below are the most frequently asked questions with detailed answers to help you understand the process clearly.

The punishment for cheque bounce includes imprisonment up to two years, or a fine up to twice the cheque amount, or both. Additionally, the court awards compensation to the complainant under Section 357(3) of the Criminal Procedure Code, typically equivalent to the cheque amount or more. Courts may also order interim compensation of up to 20% of the cheque amount during the trial itself under Section 143A.

Q2: What is the time limit for sending legal notice for cheque bounce?

The legal notice must be sent within 30 days of receiving information from the bank about cheque dishonour. This timeline is mandatory and jurisdictional under Section 138. If you miss this deadline, you cannot file a criminal complaint for cheque bounce, so immediate action is critical.

Q3: How many days does the drawer have to make payment after receiving notice?

The drawer has exactly 15 days from the date of receiving the legal notice to make payment of the cheque amount. This period is statutory and cannot be extended unilaterally by either party. The timeline begins from the date the drawer actually receives the notice as per the postal acknowledgment or delivery receipt.

Q4: Can I file a complaint immediately after sending the notice?

No, you must wait for the 15-day period to expire after the drawer receives the notice. The complaint can only be filed after these 15 days have passed. However, you must then file within 30 days from when the cause of action arises, which is the day after the 15-day period expires.

Q5: What if the cheque was post-dated? Is it still valid under Section 138?

Yes, post-dated cheques are completely valid and enforceable under Section 138. The cheque becomes a negotiable instrument on the date written on it. You should present it on or after that date but within the validity period, and if it bounces due to insufficient funds or other qualifying reasons, you can proceed with criminal action exactly like any regular cheque.

Q6: What reasons for cheque dishonour qualify for Section 138 action?

Only dishonour due to insufficient funds, amount exceeding the arranged overdraft limit, account closed by drawer, or payment stopped without lawful justification attract Section 138 liability. Technical reasons like signature mismatch, stale cheque, alteration requiring confirmation, or bank clearing errors do not qualify for criminal prosecution under this section.

Q7: Can I send the legal notice by email or WhatsApp?

No, email or WhatsApp alone is not sufficient for legal compliance. The notice must be sent through registered post with acknowledgment due, speed post, or courier service with proof of delivery. You may send courtesy copies via email or WhatsApp for faster communication, but these cannot substitute the requirement of physical postal or courier service.

Q8: What if the drawer’s address is wrong or the notice is returned undelivered?

If you sent the notice to the drawer’s last known correct address via registered post, the law presumes valid service even if returned undelivered under Section 27 of the General Clauses Act. The burden shifts to the drawer to prove they had changed their address and informed you. You should make genuine efforts to find the current address and send to multiple known addresses if available.

Q9: Can the drawer avoid liability by closing the bank account after issuing the cheque?

No, deliberately closing the account after issuing a cheque to avoid payment still attracts Section 138 liability. Account closed is a qualifying reason for dishonour under the law, and intentional closure to defeat payment constitutes the offense. This deliberate act may even result in the court awarding harsher punishment.

Q10: What if I have lost the original cheque? Can I still file a complaint?

The original dishonoured cheque is critical evidence and losing it makes filing a valid complaint extremely difficult though not legally impossible. You should immediately approach your bank for a certified copy from their records, file a police complaint about the loss, and obtain an affidavit explaining the circumstances. However, courts may view the absence of the original cheque with suspicion.

Q11: Can I file both a criminal complaint under Section 138 and a civil suit for recovery?

Yes, absolutely. Criminal proceedings under Section 138 and a civil recovery suit are independent remedies that can be pursued simultaneously. Section 138 itself states it is without prejudice to other provisions, meaning it does not bar civil remedies. Many complainants file both to maximize recovery chances, though any amount recovered in one forum will be adjusted against the other to prevent double recovery.

Q12: What if the drawer offers to pay in installments? Should I accept?

Legally, you are not obligated to accept installment payments, but it may be commercially sensible depending on your situation. If you choose to accept, ensure you get a written settlement agreement specifying installment amounts, dates, and consequences of default. Obtain post-dated cheques or bank guarantees for each installment and include a clause that default revives your right to file a complaint for the full original amount.

Q13: What is interim compensation under Section 143A and how is it different from final compensation?

Interim compensation under Section 143A allows the court to order the drawer to pay up to 20% of the cheque amount during the trial itself, before final judgment. This provides immediate partial relief to the complainant without waiting for the trial to conclude. This interim amount is later adjusted against the final compensation awarded upon conviction, and if the accused is acquitted, the interim compensation must be refunded.

Q14: Can a company file a complaint for cheque bounce, or must it be filed by an individual?

Companies, firms, and other legal entities can file complaints under Section 138 through authorized representatives. The complaint must be signed by a person authorized by the company through board resolution or power of attorney, such as a director or manager. The authorized person’s designation and authority must be clearly stated in the complaint, and they will be examined as the complainant during trial.

Q15: What happens if the drawer dies before or during trial?

Death of the drawer generally abates criminal proceedings under Section 138 because it is an offense with personal punishment. However, if the drawer was convicted before death, the fine and compensation remain recoverable from their estate. If death occurs before conviction, proceedings typically abate and cannot be revived against legal heirs, though a civil recovery suit against the estate remains available.

Q16: Can I be arrested in a cheque bounce case?

Section 138 is a non-cognizable offense, meaning police cannot arrest without a warrant or investigate on their own. Only a Magistrate can issue a warrant after taking cognizance of the complaint, and even such warrants are typically bailable. Arrest is unusual in cheque bounce cases and mostly occurs when the accused repeatedly fails to appear in court despite summons.

Q17: How long does a Section 138 case take from filing complaint to judgment?

While Section 143 provides for summary trial intended for quick disposal within 6-12 months, practical timelines vary significantly. Average cases take 1.5 to 3 years in most courts due to heavy case loads and adjournments. Some delayed cases may extend 3-5 years or more depending on court efficiency, number of adjournments, witness availability, and whether discharge or quashing applications are filed.

Q18: What is the success rate of Section 138 cases?

Section 138 cases have relatively high conviction rates compared to other criminal offenses, is estimated from 60-75% in metropolitan courts. Success depends on strict compliance with procedural timelines, proper service of notice with proof, quality of documentary evidence, credible testimony, and effective legal representation. The mandatory presumption under Section 139 favoring the complainant significantly improves success prospects. This is just estimation and not factual.

Q19: What defenses can the drawer raise in a Section 138 case?

Common defenses include claiming no legally enforceable debt existed, the cheque was issued as a gift or security only, the debt was already repaid, or procedural defects like notice not received or complaint filed beyond limitation. Drawers may also claim signature forgery, cheque obtained by fraud, amount altered without consent, payment made within the notice period, or that dishonour was due to technical bank reasons not attributable to them.

Q20: Can I settle the case after filing the complaint? Is compounding allowed?

Yes, Section 138 offenses are compoundable with court permission, meaning parties can settle at any stage even during appeal. Parties negotiate settlement terms, execute a written agreement, and file a joint application before the court for compounding. If the court is satisfied the settlement is voluntary, it permits compounding and closes the case without recording a conviction.

Q21: Can foreigners or NRIs file cheque bounce cases in India?

Yes, foreigners and NRIs can file Section 138 complaints in India if the cheque was drawn on an Indian bank account and the transaction has sufficient connection with India. They may need to appear personally for examination during trial but can authorize a representative through power of attorney for routine appearances. Courts may permit video conferencing for evidence recording depending on circumstances, and Legal Pal provides specialized services to minimize personal appearance requirements.

Q22: What if the cheque was issued by a company director? Can I proceed against both the company and director?

Yes, under Section 141 both the company and its directors or officers who were in charge of and responsible for the conduct of business can be prosecuted simultaneously. Each director must be specifically named in the complaint with their designation and role described. You need to establish their responsibility for business conduct and involvement in the transaction, supported by documents like board resolutions, MCA records, and correspondence showing their knowledge or participation.