What Is a Cheque Bounce Case?
When someone issues you a cheque, expecting it to be honored, but the bank returns it (dishonor) due to insufficient funds or other valid reasons, you may have a cheque bounce case. If certain legal conditions are met, the drawer (issuer) can be prosecuted under Section 138 of the NI Act.
In Karnataka courts, including Bengaluru, such cases are treated seriously, because the law is meant to deter the issuance of cheques without sufficient backing.
Legal Framework & Key Provisions
Here are the major legal principles applicable to cheque bounce cases in Karnataka
| Provision / Principle | What It Means |
|---|---|
| Section 138, NI Act | The main penal provision — dishonor of cheque for insufficiency of funds (or related grounds) when cheque is given for a legally enforceable debt |
| Statutory Notice | After the cheque bounces, the payee must deliver a demand notice within 30 days of receiving the return memo, demanding payment. |
| Waiting Period (15 days) | Once the notice is served, the drawer has 15 days to pay. If they don’t, a complaint may be filed. |
| Complaint Filing (within 30 days) | After the 15-day notice window expires, the payee has 30 days to file a criminal complaint. |
| Presumption in Favor of Payee | Under Section 139, courts presume the cheque was for a valid debt, unless the drawer can rebut it. |
| Punishment | Imprisonment up to 2 years, or fine (potentially up to twice the cheque amount), or both. |
| Compoundability | The offence under Section 138 is compounding (i.e., the parties may settle and have the court quash the case). |
While the general law applies, Karnataka courts have delivered some important rulings in recent times that litigants and lawyers must be aware of:
High Court: Fine Not Always Double Cheque Amount
The Karnataka High Court held that courts should not mechanically impose a fine equal to double the cheque amount in every instance. The court must consider factors like the quantum of the loan, the defence raised, and whether the defence was false. Deccan Herald
Cheque-Bounce & Civil Recovery Can Coexist
The High Court in Bengaluru affirmed that even if a civil suit for recovery of money is ongoing, a Section 138 complaint may still proceed for the same cause of action. The Times of India
Notices to Firms & Partners Mandatory
In cases where a firm and its partners are involved, the High Court ruled that separate or joint notice must be given to both the firm and the partners. Without proper notice, the criminal case may be invalid. The Times of India
Invalid Complaints Filed Too Early
The Karnataka High Court invalidated a cheque bounce complaint that was filed before the 15-day notice period had expired. It emphasized strict adherence to procedural timelines. Deccan Herald
Cheque Dishonour & Return Memo
The bank returns the cheque with a memo stating the reason — e.g., insufficient funds.
Draft & Send Statutory Notice
Within 30 days, send a demand notice to the drawer, giving 15 days to pay.
Wait 15 Days
If the drawer pays within 15 days, proceedings may not be required. If they don’t, proceed.
File Criminal Complaint
File a complaint in the appropriate Magistrate court (within 30 days after the 15-day window). Include supporting documents: original cheque, bank memo, notice copy, proof of service, affidavit, etc.
Court Examination & Summons
The magistrate examines documents, and if satisfied, summons the accused.
Trial & Arguments
Evidence is presented, the presumption under Section 139 may be rebutted, and the court evaluates defences.
Judgement / Sentence
If conviction, the court may sentence or fine. Compensation to the payee may also be awarded.
Compounding / Settlement
If parties settle before conclusion or even after conviction (in certain cases), courts may quash proceedings. Recently, the Supreme Court held that once a compromise is reached, courts should respect it and may avoid imprisoning a convicted drawer
