Dos & Don'ts for Cheque Bounce in India

To handle a bounced cheque in India, the payee must act quickly: get a bank return memo, send a legal notice within 30 days, and then file a complaint in court within 30 days of the 15-day payment period expiring. The drawer should promptly contact the payee to resolve the issue and avoid criminal prosecution, respond to all legal notices, and make arrangements for payment. 

For the Payee (the one who received the cheque)

• Do:

  • Obtain the Cheque Return Memo from your bank immediately. 

  • Send a legal notice to the issuer within 30 days of receiving the return memo. 

  • File a complaint with the Magistrate's Court within 30 days after the issuer fails to pay within the 15-day period specified in the notice. 

  • Submit all required documents, including the original cheque, return memo, legal notice, and proof of delivery, to the court. 

• Don't:

  • Delay sending the legal notice or filing the complaint, as this can strengthen your case and show seriousness. 

For the Drawer (the one who issued the cheque)

• Do:

  • Immediately contact the payee to understand why the cheque bounced and work towards a resolution. 

  • Pay the amount: to the payee to avoid legal action. 

  • Consult a lawyer: to discuss your liabilities and formulate a defense if you receive a legal notice. 

  • Maintain records: of all communications, documents, and correspondence related to the cheque and the bounce. 

• Don't:

  • Ignore: the legal notice or court summons; read it carefully and respond promptly. 

  • Admit: to any allegations in the legal notice without consulting a lawyer. 

  • Agree to settlements: without legal advice to ensure terms are favorable and properly documented. 

Key Legal Timelines (Section 138 of the Negotiable Instruments Act, 1881) 

1. Cheque Presented: The cheque is presented for payment. 

2. Cheque Bounces: The bank issues a return memo stating the reason for dishonor. 

3. Legal Notice Sent: The payee sends a legal notice to the drawer within 30 days of the memo. 

4. 15-Day Grace Period: The drawer has 15 days from the notice receipt to pay the amount. 

5. Complaint Filed: If no payment is made, the payee can file a criminal complaint in the Magistrate's Court within 30 days of the 15-day period expiring.