Cheque Bounce Case in Chandigarh: Section 138 NI Act Process & Remedies
A bounced cheque — whether for a loan repayment, property transaction, security deposit, or business payment — is not merely a contractual failure. Under Indian law, it is a criminal offence punishable with imprisonment of up to two years or a fine up to twice the cheque amount. Section 138 of the Negotiable Instruments Act, 1881 provides both a criminal remedy and a practical path to recovering your money. This guide explains the process step by step.
When is a Cheque Bounce a Criminal Offence?
Not every returned cheque triggers criminal liability. Section 138 applies when:
- The cheque was issued for the discharge of a legally enforceable debt or liability (not for a gift or donation)
- The cheque is presented to the bank within 6 months of the date on the cheque (or its validity period)
- The bank returns the cheque unpaid (due to insufficient funds, account closed, stop payment instruction, or signature mismatch)
- The payee sends a legal notice within 30 days of receiving the dishonour memo from the bank
- The drawer fails to pay within 15 days of receiving the legal notice
If all five conditions are met, a complaint can be filed before the Magistrate.
Step-by-Step Cheque Bounce Process in Chandigarh
Step 1: Obtain the Dishonour Memo When your bank returns the cheque, you will receive a Cheque Return Memo (also called a Return Memo or Dishonour Memo). This document is critical — it specifies the reason for return and the date of return. Keep the original cheque and the memo safely.
Step 2: Send a Legal Notice Within 30 Days Within 30 days of receiving the dishonour memo, send a legal notice to the drawer (the person who issued the cheque) by Registered Post AD (Acknowledgement Due). The notice must:
- Mention the cheque number, date, and amount
- State that the cheque has been dishonoured
- Demand payment of the cheque amount within 15 days
- Be sent to the drawer's correct address
Critically important: The 30-day time limit for sending the notice is strict. Missing it kills your criminal case under Section 138. Always engage a lawyer promptly after a cheque returns.
Step 3: Wait 15 Days for Payment The drawer has 15 days from receipt of the notice to pay the cheque amount. If they pay within this period, the matter is settled (though you can still dispute interest, damages, etc. in civil court).
Step 4: File the Complaint Before the Magistrate If the drawer does not pay within 15 days, you can file a complaint before the Metropolitan Magistrate, Chandigarh (Section 138 cases are filed in the court having territorial jurisdiction — typically where the cheque was presented, i.e., the bank's branch location). The complaint must be filed within 30 days of the expiry of the 15-day notice period.
Documents required for the complaint:
- Original dishonoured cheque
- Bank's dishonour memo
- Copy of legal notice sent
- Postal receipt (Registered Post) and Acknowledgement Due card
- Delivery status of the notice
Step 5: Pre-Summoning Evidence In Chandigarh courts, after the complaint is filed, the complainant records a brief pre-summoning statement before the Magistrate. Based on this, the Magistrate issues a summons to the accused drawer.
Step 6: Trial Once summoned, the accused appears. If they plead not guilty, a full trial takes place — the complainant's evidence is recorded, followed by cross-examination by the defence, then the accused's defence. Arguments are made, and the Magistrate passes judgment.
Step 7: Conviction and Compensation If the accused is convicted, the punishment under Section 138 includes:
- Imprisonment up to 2 years, OR
- Fine up to twice the cheque amount, OR Both
Critically, the courts almost always order the convict to pay the cheque amount as compensation to the complainant (Section 357 CrPC / Section 396 BNSS).
Defences Available to the Cheque Issuer
Common defences raised by accused persons:
- The cheque was a "security cheque" (though courts are skeptical of this)
- The underlying debt did not exist or was already repaid
- The cheque was stolen or issued under coercion
- The notice was not received
- The cheque was issued on behalf of a company (director liability issues)
A competent defence advocate can evaluate these defences and present them effectively before the Magistrate.
Negotiation and Settlement
Section 138 cases are frequently settled through negotiation even after filing. Once criminal proceedings are initiated, the accused typically becomes more motivated to pay. Complainants should be open to a fair settlement (including payment of cheque amount + interest + legal costs) rather than purely pursuing conviction.
Under Section 147 of the NI Act, cheque bounce cases are compoundable — meaning the complainant can agree to withdraw the case upon receiving the payment.
Important Limitation: NI Act vs. Civil Suit
Section 138 is a criminal remedy, not a civil one. The Magistrate can order compensation, but the primary purpose is punishment of the offender. For a civil remedy — to recover the principal amount through a civil court decree with interest and damages — a separate civil suit (suit on dishonoured instrument) can also be filed alongside the criminal case.
How Tricity Law Firm Can Help
Tricity Law Firm handles cheque bounce cases for both complainants (seeking to recover money) and accused persons (defending against Section 138 complaints):
- Drafting and sending legal notices within the strict time limits
- Filing Section 138 complaints before the Magistrate Court, Chandigarh
- Appearing on all hearing dates
- Negotiating settlements
- Defending against cheque bounce cases
- Filing civil suits for recovery alongside criminal proceedings
Call +91-9814110005 or contact us to act quickly on your cheque bounce matter — time limits are strict and missing them is fatal to your case.
Disclaimer: This article is for general information only and does not constitute legal advice. Cheque bounce laws involve strict time limits — please consult an advocate immediately.