Key points
- The complainant must prove a cheque, dishonour, a demand notice within 30 days of the dishonour memo, and non-payment within 15 days of receipt of the notice; a defect in any of these is fatal.
- Section 139 presumes the cheque was for a legally enforceable debt, but the accused can rebut it on a preponderance of probabilities, including through the complainant's own documents.
- Interim compensation of up to 20% of the cheque amount can be ordered under Section 143A, so the defence should be raised early.
Check the ingredients first
A Section 138 complaint stands only if the cheque was presented within its validity, the demand notice was sent within 30 days of receiving the bank's return memo, the accused failed to pay within 15 days of receiving the notice, and the complaint was filed within one month after that. Errors in dates, a notice sent to the wrong address without proof of service, or a notice demanding more than the cheque amount without separating the sums, are common grounds on which complaints fail.
No legally enforceable debt
Section 139 raises a presumption that the cheque was issued in discharge of a debt or liability. In Rangappa v. Sri Mohan (2010) the Supreme Court held that the presumption includes the existence of the debt but can be rebutted on the balance of probabilities. Typical rebuttals: the cheque was given as security for a transaction that never matured, the amount was already repaid, the debt was time-barred, or the complainant's accounts do not reflect the loan.
Blank and security cheques
Handing over a signed blank cheque does not defeat the complaint if it was voluntarily given, but a cheque issued as security cannot be presented for an amount that had not fallen due at the time of presentation.
Company cases
Where the drawer is a company, directors are liable only if they were in charge of and responsible for its business at the relevant time, and the complaint must specifically say so. Non-executive or resigned directors can seek quashing on this ground.
Settlement
The offence is compoundable at any stage. Paying the cheque amount with reasonable interest and costs usually brings the case to an end, and the High Court will quash the proceedings on a joint application.
Frequently asked questions
Can I be jailed for a cheque bounce?
Yes. The punishment is imprisonment up to two years, a fine up to twice the cheque amount, or both. In practice courts most often impose a fine with compensation, but imprisonment is ordered in cases of repeated default.
What if I stopped payment on the cheque?
Stop-payment instructions do not avoid liability if the cheque was issued for a legally enforceable debt. The defence has to be that no such debt existed or that the cheque was misused.
Related practice area: Criminal Defence
This article is for general information and does not constitute legal advice. Laws, rules and limitation periods change and depend on the facts; please take advice on your own situation before acting. Reading this article does not create a lawyer-client relationship with Akhtars Legalitarian.