Understanding Cheque Bounce (Stop Payment by Drawer) for Legal Light Consulting – LLC

Has a cheque you received been stopped by the person who wrote it (the “drawer”)? This can be a serious issue, especially when it involves a large sum of money. Legal Light Consulting is here to guide you through your legal options.

The Situation:

You provided goods or services to a buyer (the drawer) and received a cheque for Rs. 100,000,000. However, the drawer stopped payment, and the cheque bounced. You have the following evidence to support your transaction

When a cheque bounces because the drawer has stopped the payment, it can be a significant issue. Let’s explore the necessary steps to address this problem, especially for a firm like Legal Light Consulting – LLC.

Scenario Overview

• Drawer and Buyer: Same entity/person.
• Reason for Cheque Issuance: Received for delivering goods/services.
• Cheque Amount: Rs. 100,000,000/-
• Return Memo Receipt Date: 09-01-2025

Types of Evidence to Support the Transaction

To support the transaction, various types of evidence can be used:

Written Evidence

1. Agreement
2. Memorandum of Understanding
3. Invoice

Digital Evidence

1. Email
2. WhatsApp messages
3. Text Messages

Legal Advice on Cheque Bounce Issues

When filing a complaint, only the details of the transaction for which the cheque has been issued should be mentioned. In case of rebuttal by the drawer, the drawee may produce the above evidence to support the transaction.

Probable Remedies and Legal Actions

Criminal Proceedings

1. Criminal Complaint under Negotiable Instruments Act

• Relevant Sections:

  • Section 117: Rules Act to Compensation
  • Section 138: Dishonor of Cheque for Insufficiency of funds
• Territorial Jurisdiction: UCO Bank, Supreme Court of India, New Delhi (Return memo issuing branch).

• Limitation

  :

  • Notice should be served within 30 days from 09-01-2025.
  • If the cheque is still valid and notice has not been served, it can be re-presented to the bank within 90 days to revive the limitation period and initiate legal proceedings.

• Procedural Aspects:

  • Section 142: Cognizance of Offenses
  • Section 143A: Power to direct interim compensation
  • Section 143: Power of Court to try summarily
  • Section 145: Evidence on affidavit
  • Section 146: Bank’s slip prima facie evidence of certain facts
  • Section 147: Offences to be compoundable

2. FIR for Cheating

• Relevant Sections:

  • Section 318: Cheating (Previously Section 415 of IPC, 1860)
• Territorial Jurisdiction: UCO Bank, Supreme Court of India, New Delhi.

• Limitation:

  • To file a case before 09-01-2026 (1 year).

• Procedural Aspects:

  • Section 516: Exclusion of time in certain cases

Your Legal Options:

Legal Light Consulting recommends exploring the following remedies:

1. Criminal Proceedings:

• Complaint under the Negotiable Instruments Act, 1881:

  • This is a common legal step for cheque bounce cases, including those where payment is stopped.
  • Relevant Sections: Section 138 (dishonor of cheque) and Section 117 (rules for compensation).
  • Time Limit: You must send a legal notice to the drawer within 30 days of the cheque bounce date (by February 8, 2025). Alternatively, if the cheque is still within its validity period, and no notice has been served, you can represent the cheque again to the bank, before the 90 days of the cheque date, to revive the limitation period.
  • Procedural Aspects: Sections 142, 143A, 143, 145, 146, and 147 of the Act outline court procedures.

• FIR for Cheating (Bharatiya Nyaya Sanhita, 2023, Section 318):

  • If you suspect the drawer intentionally deceived you, you can file a First Information Report (FIR).
  • Time Limit: You have one year from the cheque bounce date (until January 9, 2026).

• FIR for Breach of Trust (Bharatiya Nyaya Sanhita, 2023, Section 316):

  • if there was a trust based transaction, and that trust was broken, you can file a FIR.
  • Time Limit: You have three years from the cheque bounce date (until January 9, 2028).

2. Mediation:

• Mediation is a mandatory step.
• Relevant Act: The Mediation Act, 2023.
• Key Sections: Sections 13, 18, 21, 27, 28, and 29.

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

• You can file a civil lawsuit to recover the amount owed.
• Relevant Sections: Order 37 of the CPC (summary procedure) and Section 73 of the Indian Contract Act, 1872 (compensation for breach of contract).
• Time Limit: You have three years from the cheque bounce date (until January 9, 2028).
• Pecuniary Jurisdiction: Due to the large amount, this case would fall under the jurisdiction of the High Court of Delhi.

Important Legal Advice:

• When filing a complaint, focus on the transaction related to the bounced cheque.
• Be prepared to present your evidence if the drawer disputes the transaction.
• As per section 138 & 139 of Negotiable Instrument Act, Initially the burden of proof is not on the drawee, but if the drawer challenges the transaction, then the burden of proof shifts to the drawee.
• Legal Light Consulting strongly advises seeking professional legal counsel. Laws can be complex, and your specific situation may require tailored guidance.

Disclaimer:

This article is for informational purposes only and does not constitute legal advice. For personalized legal assistance, contact Legal Light Consulting.

3. FIR for Breach of Trust

• Relevant Sections:

  • Section 316: Criminal Breach of Trust (Previously Section 405 of IPC, 1860)
• Territorial Jurisdiction: UCO Bank, Supreme Court of India, New Delhi.
• Limitation:
  • To file a case before 09-01-2028 (3 years).
• Procedural Aspects:
  • Section 516: Exclusion of time in certain cases

Mediation

Mediation notice has been served as mandatory.

• Relevant Sections:
  • Section 28: Challenge to mediated settlement agreement
• Procedural Aspects:
  • Section 13: Territorial jurisdiction to undertake mediation
  • Section 18: Time-limit for completion of mediation
  • Section 21: Non-Settlement report
  • Section 27: Enforcement of mediated settlement agreement
  • Section 28: Challenge to mediated settlement agreement
  • Section 29: Limitation

Recovery Suit under CPC

• Relevant Sections:
  • Order 37: Summary Procedure
  • Section 73 of Indian Contract Act, 1872: Compensation for loss or damage
  • Section 146 of Indian Contract Act, 1872: Co-sureties liable to contribute equally
• Territorial Jurisdiction: UCO Bank, Supreme Court of India, New Delhi.
• Limitation:
  • To file a case before 09-01-2028 (3 years).
• Pecuniary Jurisdiction: High Courts of Delhi
• Court Fees: Rs. 978,344.00/-
• Procedural Aspects:
  • Order 37 of CPC: Summary Procedure

Advice

• Section 138 & 139 of Negotiable Instruments Act: It is the drawee’s responsibility to prove the existence of liability only if the drawer challenges it.
• Evidence: Can be physical or circumstantial.
• High Courts & Supreme Court Rulings: There are cases where the drawee failed to prove their point when challenged by the drawer.

Conclusion

This article is for educational and informational purposes only. The information provided here is intended to offer general knowledge about legal matters but does not constitute legal advice.

Legal Light Consulting, as a law firm, does not take any responsibility for the accuracy or completeness of the content shared in this article.

Due to the complexity of legal processes and potential variations depending on your work/business type or location, it is highly recommended that you seek professional assistance from legal experts like Legal Light Consulting.

Their experienced team of lawyers can guide you through various legal procedures and help ensure a smooth and hassle-free process.