Cheque Bounce Due to Insufficient Funds: Legal Remedies and Advice

A cheque bounce occurs when a cheque issued by the drawer is not honored due to insufficient funds in the bank account. In legal terms, this can lead to both civil and criminal liabilities under Indian law.

Understanding the Transaction

• The drawer of the cheque and the buyer are the same.
• The cheque was received for delivering goods/services.
• Evidence is available to support the transaction.

Types of Evidence to Support the Case

Written Evidence:

1. Memorandum of Understanding
2. Invoice
3. Letters

Digital Evidence:

1. Email communication
2. WhatsApp messages
3. Text messages

Circumstantial Evidence:

1. Account statements

Key Dates and Amount

• Cheque Amount: Rs. 5,00,000/-
• Return Memo Receipt Date: 27-01-2025

Legal Remedies Available

A. Criminal Proceedings

1. Criminal Complaint under the Negotiable Instruments Act, 1881

• Relevant Sections:
  • Section 117 – Rules for Compensation
  • Section 138 – Dishonor of Cheque due to Insufficient Funds
• Territorial Jurisdiction:
  • UCO Bank, Supreme Court of India, New Delhi (Return memo issuing branch)
• Limitation Period:
  • A legal notice should be served within 30 days from the date of return memo (i.e., on or before 26-02-2025).
  • If the cheque is still valid and notice has not been served, the cheque can be re-presented within 90 days to restart the limitation period.

Procedural Aspects:

• Section 142 – Cognizance of Offenses
• Section 143A – Power to Direct Interim Compensation
• Section 143 – Summary Trial by Court
• Section 145 – Evidence on Affidavit
• Section 146 – Bank’s Slip as Prima Facie Evidence
• Section 147 – Offenses to be Compoundable

2. FIR for Cheating

• Relevant Law: Bharatiya Nyaya Sanhita, 2023
• Relevant Section: Section 318 – Cheating (Previously IPC Section 415)
• Territorial Jurisdiction: UCO Bank, Supreme Court of India, New Delhi
• Limitation: Case should be filed before 27-01-2026 (1 year)
• Procedural Aspect:
  • Section 516 of the Bharatiya Nagarik Suraksha Sanhita, 2023 (Exclusion of Time in Certain Cases)

3. FIR for Breach of Trust

• Relevant Law: Bharatiya Nyaya Sanhita, 2023
• Relevant Section: Section 316 – Criminal Breach of Trust (Previously IPC Section 405)
• Territorial Jurisdiction: UCO Bank, Supreme Court of India, New Delhi
• Limitation: Case should be filed before 27-01-2028 (3 years)
• Procedural Aspect:
  • Section 516 of the Bharatiya Nagarik Suraksha Sanhita, 2023 (Exclusion of Time in Certain Cases)

B. Mediation

• Legal Notice: Served as required.
• Mediation: Not yet initiated, which is mandatory.
• Relevant Law: Mediation Act, 2023
• Key Sections:
  • Section 13 – Territorial Jurisdiction for Mediation
  • Section 18 – Time-limit for Completion
  • Section 21 – Non-Settlement Report
  • Section 27 – Enforcement of Mediated Settlement
  • Section 28 – Challenge to Mediated Settlement
  • Section 29 – Limitation

C. Civil Suit for Recovery

1. Recovery Suit under the Civil Procedure Code (CPC), 1908

• Relevant Laws:
  • CPC Order 37 – Summary Procedure
  • Indian Contract Act, 1872
    • Section 73 – Compensation for Breach of Contract
    • Section 146 – Co-sureties Liable to Contribute Equally
• Territorial Jurisdiction: UCO Bank, Supreme Court of India, New Delhi
• Limitation: Case should be filed before 27-01-2028 (3 years)
• Pecuniary Jurisdiction: District Judge
• Court Fees: Rs. 7,224/-

Procedural Aspects:

• CPC Order 37 – Summary Procedure for Recovery of Amount
• Indian Contract Act, 1872 – Sections 73 and 146

Legal Advice

• As per Sections 138 & 139 of the Negotiable Instruments Act, the burden of proving the liability is not on the drawee (payee) unless challenged by the drawer.
• If the drawer contests liability and provides supporting evidence, the drawee must then prove the legitimacy of the claim with physical or circumstantial evidence.
• Many cases have favored the drawer where the drawee failed to provide substantial proof.

Conclusion

This article is meant for educational and informational purposes only and does not constitute legal advice. Legal Light Consulting does not take responsibility for the accuracy or completeness of the content shared in this article.

Due to the complexity of legal procedures and variations depending on business type or location, seeking professional legal assistance is strongly recommended. Legal Light Consulting’s team of expert lawyers can help navigate legal complexities and ensure a hassle-free process.