Under Section 138 of the Negotiable Instruments Act, what are the steps to take if a cheque bounces, and what is the time limit for filing a complaint?

Detailed Legal Analysis

Under Section 138 of the Negotiable Instruments Act, 1881, if a cheque bounces due to insufficient funds or if it exceeds the amount arranged by the drawer, the payee can initiate legal proceedings against the drawer. Here are the steps to take if a cheque bounces:

• Ensure the Cheque is Dishonored: The first step is to confirm that the cheque has been returned by the bank due to reasons such as insufficient funds, account closure, or any similar grounds.
• Obtain a Cheque Return Memo: After the cheque is dishonored, request a cheque return memo from the bank. This document serves as proof of the dishonor of the cheque.
• Send a Legal Notice: Within 30 days of receiving the cheque return memo, the payee must send a legal notice to the drawer. This notice should state:
  • The details of the cheque, including its number and amount.
  • The reason for dishonor as per the bank's memo.
  • A demand for the payment of the cheque amount within 15 days from the receipt of the notice.
• Wait for the Response: The drawer has 15 days from the date of receiving the legal notice to make the payment. If the payment is not made, the payee can proceed to file a complaint.
• File a Complaint: If the drawer fails to pay within the stipulated 15 days, the payee can file a complaint in a criminal court under Section 138 of the Negotiable Instruments Act. The complaint must be filed within:
  • One month from the expiry of the 15-day notice period.
• Prepare for Trial: The court will issue summons to the drawer. The payee should be prepared to present evidence, including the original cheque, the cheque return memo, and the legal notice sent to the drawer.

It is essential to adhere strictly to the timelines specified under Section 138, as failure to comply can result in the dismissal of the complaint. The legal provisions for this process are encompassed within the Negotiable Instruments Act, 1881, particularly in Sections 138 to 142, which detail the procedure and penalties associated with dishonored cheques.