Capsule 1 on Cheque Bounce

Dishonour of a Cheque or commonly referred Cheque Bounce cases occur when the Receiver of a Cheque deposits the cheque, during its period of validity, with the bank, and the bank gives an endorsement that cheque is dishonoured i.e. the payment is not received. The Dishonour of cheque can be for various reasons such as Insufficient Funds, Exceeds Arrangement, Account Closed, Stop Payment.

In the event of such dishonour of a cheque, the timeline plays a particularly important role to effectively contest the case.

Section 138 and Section 142 of the Negotiable Instruments Act, 1881 lay out the procedure for challenging the Dishonour of a Cheque and the rule of 30-15-30 is to be noted.

Once a Cheque is deposited and returned by a Bank as Dishonoured, the Receiver of the Cheque must issue a Notice under Section 138 (b) of the Negotiable Instruments Act, 1881 to the Giver of the Cheque within 1 month from receiving such endorsement from the Bank.

Once the Notice is issued and received by the Giver of the cheque, Section 138(c) grants the Giver 15 days’ time from the date of receiving such Notice to make good the payment.

Once this 15 day period lapses, if the Giver of the Cheque does not honour the cheque by paying the amount to the Receiver of the Cheque, Section 142 (b) of the Negotiable Instruments Act, 1881 gives Receiver of the Cheque has 1 month time within which he must file a Complaint before the Jurisdictional Magistrate. This 1 month begins after 15 days’ time given to the Giver of the cheque has lapsed.


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