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Implications of cheque bounce in India


Author: Preeti Khandelwal

What is Cheque bounce?

 A cheque is said to be bounced if the cheque written by the issuer is bad due to some technical reasons or mismatch of signature or due to insufficient fund in the account, hence not processed by the bank then cheque is returned or dishonoured.

Cheque bounce is a serious offence. The complaint for the cheque bounce is file under section 138 of Negotiable Instrument Act,1881.



Supreme Court on pending of cases under the N.I Act


 The Supreme Court said that, the pendency of the proceedings in cheque bounce cases and the multiplicity of complaints in which a cause of actions arising from one transaction is litigated has dampened the ease of doing business. SC also directed that nature of offence under section 138 of NI act which relates to dishonour of cheque is quasi criminal and the purpose of the enactment is to provide security to creditors and instill confidence in the banking system of the country.(


 The reasons for the delay are namely:

·        A delay in serving the summons.

·        Conversion of summary trials to summon trials without recording cogent reasons.

·        Inconsistency in deciding whether the issuance of process under Section 202 of the CrPC requires preliminary inquiry on the part of the Magistrate.

·        Offences committed as part of the same transaction are not jointly tried under Section 220 CrPC.( )



The Supreme Court directed the constitution of special courts with a retired judge in five states of Delhi, Gujarat, Maharashtra, Rajasthan and UP from Sept 1 for expeditious disposal of cheque bounce cases.


 Time to dishonour Section 138? Why is there little reason to continue with India's cheque bounce law?

The major lacuna in the law is that there’s a presumption of mens rea without need for any additional proof. The mere fact that a cheque is dishonoured is treated as proof of criminal intent.

For example, 1) If someone goes to shop to buy a TV and issues cheque towards payment which bounces. In this case it is safe to presume that the person had intention to cheat for he would have known that cheque is likely to bounce. Now we take a variation in the same scenario, what if the person take loan from lender to buy the TV and hands over the post dated cheque as security for payment on a future date. The borrower believes he can arrange liquidity at a future date and the lender also concurs with the assessment that is why the loan is sanctioned in the first place. Clearly here the criminal intent cannot be presumed  in the absence of corroborative evidence such as forged documents false claims etc.

Cheques were the primary means of transaction in the earlier times. But things have changed over the last two decades. Most of the payments have moved to plastic or electronic channels and cheques have become mere instrument for securing credit or obtaining deferred payment.

Nearly 36 lakhs cheque bounce are pending in the courts, majority of which proceeding are against individuals or businesses. These sections needs to be struck down as it it is clogging up our legal system.(  )   



Certain Amendments in the NI Act,1881:](

In order to strengthen the ease of doing business in India the parliament passes The negotiable Instrument Act 1881 and thereby introduced two new provisions 143A has been inserted which states that the Negotiable Instruments (Amendment) Act, 2018 which linked the interim compensation to be paid to the payee with the cheque amount. It has also been provided that the interim compensation payable under this section may be recovered as if it were a fine under section 421 of CrPC 1973.later on the amount of fine imposed under section 138 of NI Act or the amount of compensation awarded under section 357 of CrPC shall be reduced by the amount paid or recovered as interim compensation.

Section 148:

In case of an appeal filed by drawer against conviction under section 138 the appellate court may order the appellant to deposit such sum which shall be minimum of 20% of the fine or the total compensation awarded by the trial court.

In the case of Surinder Singh Deswal vs Virender Gandhi the Supreme Court held that “Therefore irrespective of the provisions 357(2) of CrPC pending appeal before the first appellate court challenging the order of conviction and sentence under section 138 of NI Act the Appellate Court is conferred with the power o direct Appellant to deposit such sum which shall be minimum of 20% of the fine or the compensation awarded by the trial court. Please refer( CRIMINAL APPEAL NOS.1936-1963 OF 2019)



In the case of Ginni Garments and Anr. vs Sethi Garment and Anr. The Hon’ble High Court of Punjab and Haryana has held that section 143A has no retrospective effect while section 148 only applies to the pending appeals on the date of enactment of the new amendment.(CRR No.9872-2018(O&M) and other connected cases  )



  1. A cheque getting bounced may have many reasons including bank incompetency and network issues, but, as pointed by the author in this article, it can be treated with malicious content which can only be proven by corroborative facts.


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