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- Section 138 of the Negotiable Instruments Act, 1881 – This section makes it a criminal offense to dishonor a cheque for insufficiency of funds.
- Demand notice – Before filing a complaint with the magistrate’s court, the payee must send a demand notice to the drawer asking them to pay the amount of the cheque within 15 days.
- Complaint – If the drawer fails to pay the amount within 15 days of receiving the demand notice, the payee can file a complaint with the magistrate’s court.
- Summons – Once the complaint is filed, the court will issue a summons to the drawer.
- Trial – If the drawer appears in court and pleads not guilty, the court will hold a trial.
- Punishment – If the drawer is found guilty, the court can punish them with imprisonment for up to two years, or a fine that can extend to twice the amount of the cheque, or both.
In addition to the above provisions, there are a few other things that you need to know about cheque bounce cases:
- The complaint must be filed within 30 days of receiving the cheque bounce notice.
- The complaint can be filed with the magistrate’s court in the jurisdiction where the cheque was dishonored or where the drawer resides.
- The drawer can file a petition for compromise with the payee at any stage of the case.
- If the drawer and payee reach a compromise, the court will dismiss the case.
- If the drawer is convicted and sentenced to imprisonment, they can apply for bail.
