Cheque Bounce 


In this case study, we will explore a real-life scenario involving a cheque bounce case. Cheque bounce refers to the situation where a cheque issued by one party is returned by the bank due to insufficient funds in the account or other valid reasons. We will discuss the legal aspects of such cases, the relevant laws, and the potential consequences for both the issuer and the recipient of the bounced cheque.

Case Background

Our client, Mr.K.H Purushotham, was engaged in a business transaction with Mr.Nagaraju HK, wherein Mr.K.H Purushotham provided goods worth a substantial amount. In return, Mr.Nagaraju HK issued a post-dated cheque to Mr.K.H Purushotham as payment. However, when Mr.K.H Purushotham presented the cheque for encashment on the due date, it bounced due to insufficient funds in Mr.Nagaraju HK’s account.

Legal Framework:

  • Negotiable Instruments Act, 1881: This act governs the legal framework related to negotiable instruments, including cheques, promissory notes, and bills of exchange. Section 138 of this act specifically deals with the offense of cheque bounce and its consequences.
  • Section 138 of the Negotiable Instruments Act:
    • Dishonor of cheque: Section 138 states that if a cheque is returned unpaid by the bank due to insufficient funds or any other reason, the person who issued the cheque is liable for criminal prosecution.
    • Legal notice: The recipient of the bounced cheque must issue a legal notice within 30 days to the issuer, demanding the payment of the cheque amount.
    • Time for payment: The issuer has 15 days from the receipt of the legal notice to make the payment. Failure to do so can lead to legal proceedings.
    • Criminal prosecution: If the issuer fails to make the payment within the specified time, the recipient can file a criminal complaint, leading to legal proceedings.

Legal Proceedings

In our case, after receiving the bounced cheque, Mr.K.H Purushotham promptly sent a legal notice to Mr.Nagaraju HK, demanding payment within 15 days as per the law. However, Mr.Nagaraju HK failed to make the payment within the stipulated period, prompting Mr.K.H Purushotham to initiate criminal proceedings.

The legal proceedings included the following steps:

  • Filing a complaint: Mr.K.H Purushotham filed a complaint before the appropriate court, providing all the necessary documents, including the bounced cheque, legal notice, and proof of receipt.
  • Evidence presentation: Both parties presented their evidence, including bank statements, correspondence, and witness testimonies, to support their claims.
  • Trial: The court examined the evidence and heard the arguments from both parties. It considered the provisions of Section 138 of the Negotiable Instruments Act and relevant case laws.
  • Judgment: The court passed a judgment based on the evidence and applicable laws. In this case, the court found Mr.Nagaraju HK guilty of the offense of cheque bounce.
  • Penalty and compensation: The court imposed a penalty on Mr.Nagaraju HK, including imprisonment and a fine. Additionally, Mr.Nagaraju HK was directed to compensate Mr.K.H Purushotham for the cheque amount and any associated legal expenses.


The case study highlights the legal implications and consequences of cheque bounce cases. The Negotiable Instruments Act, particularly Section 138, provides a legal recourse for individuals who have been affected by the dishonor of a cheque. It is crucial for both parties involved in a business transaction to be aware of their rights and obligations to avoid such issues and maintain trust in financial transactions.

Leave a Comment

Your email address will not be published. Required fields are marked *

Scroll to Top