What if your cheque bounces? Check out the legal obligations


Are you aware that any failure to honour the payment commitments resulting in to the bouncing of a cheque or the ECS mandate is a criminal offence?

The idiom ‘cut the cloth to suit the purse’ or ‘cut your coat according to your cloth’ is timeless. Whether one is borrowing for buying a house or for business, or obtains credit card facilities or signs up for Electronic Clearance System (ECS) for the services one receives regularly should be aware that any failure to honour the payment commitments resulting in to the bouncing of a cheque or the ECS mandate is a criminal offence.

Section 138 of the Negotiable Instrument Act deals with the bouncing of cheque. Section 25 of the Payment and Settlement Systems Act, 2007 accords the same rights and remedies to the payee (beneficiary) against the dishonour of electronic funds transfer instruction as are available to the payee under the Negotiable Instruments Act.

Consequently, whether one issues cheques or signs up for the ECS mandate, the obligations are similar and accordingly if the funds transfer initiated by a person from an account maintained by him cannot be executed on the ground that the amount of money standing to the credit of that account is insufficient to honour the transfer instruction or that it exceeds the amount arranged to be paid from that account by an agreement made with a bank, such person shall be deemed to have committed an offence. Therefore, the person shall without prejudice to any other provisions of this Act be punished with imprisonment for a term which may be extend to two years, or with fine which may extend to twice the amount of the cheque/ electronic funds transfer, or with both.

If for any reason, the individuals/ entities who have issued cheques (current dated or post dated) or given the ECS mandate and expect that the instrument will get dishonoured should approach the lender/ service or goods provider in time and seek further time or resolution. Closing one’s eyes thinking that it will take years before any legal action will be taken are sadly mistaken.

It is also important that if you are a partner or director of the entity, one is careful that sufficient fund arrangements are made before cheques are issued or the ECS mandate is given. The obligation under law will transverse both on the entity and the person who has signed the cheque. The payee (beneficiary) will also attempt to cover other partners / directors who though have not signed the instrument but in their opinion are equally liable.

In effect, it is essential that proper legal advice is sought if there are going to be dishonouring of obligations.

Similarly for payee/ beneficiary (lender or provider of service/goods), timely action is required as any lapses in commencing proceedings in time or filing of the proceedings under wrong jurisdiction or commencing proceedings against the person against whom the action should not have been taken can make the recovery proceedings lengthy and giving the opportunity to the borrower to take legal shelter.

It is essential that both the parties are fully aware of the legal obligations provided by the law. Failure of one party in honouring its obligation can result in a chain reaction as the receiving party in turn can also face a similar situation for want of adequate funds.


  1. People should aware of financial transactions.the financial institution should only once make a contact with the person who issued the cheque.before taking any action.some times it is a simple mistake.if the person plays with the system then appropriate action should be taken without any fail.let the individual learn Akesson of life.

  2. What happens if he or she doesn’t attend court ,not receives notices and arrest warrant also issued but he changing his house every time his having in won house but he has given all for lease

  3. Writing an article is good but when you face legal then the problem starts. Legal hearing date you will not get, advocate will take fees after hearing case & before getting date for any case. Now you were after opposition now follow advocate for date.

    Only spend money and time. Nothing will happen, your family and your life will get disturb.

  4. Multiple times I have informed the finance company that I couldn’t honour the payment ie ECS on the said date and request them to change the date. But the Finance company deny the same.

    Even I pay the EMI in the same month on my feasible date.

    What could happen then?

  5. Iam still fighting a case for a cheque bounce case in India for the past 5 years. Only now I have got his property attached. Indian legal system is hopeless because the police does not arrest the cheque bouncing person and because of this they are not afraid of the law and commit this crime again and again. Until and unless the law can change to continuous imprisonment without bail until it is paid these cheque bounce cases will continue to occur in India. We should learn from China.

    • I got three cheques for the payment towards the sale of my property which got bounced–I did not go to the court since I was certain that I will spend more than the amt due The best solution is to convert ourselves to Politician which is impossible for me

    • In my view the bank should take responsibility and file the case under 138, since they have a team of legals.

      Lawyers want 25 percent ir more and then takes several years.

      If the law is established, deliberately issuing cheques for no funds in account, the matter may decided by the court in 90 days,

      Rightly said by sone the defaulter has no propert / assets in his name, all in his son and wife’s name and even lives on rental with his son.

      I am talking of defaulted tenant, gives cheque under court order but no money
      In his bank
      Unfortunate, no law, takes several years

      Only banks may take responsibility for rncashing and recivery

  6. I was given cheques by DD Buildwell 6 years back as my refund for booking a plot with them. All bounced . Under section 138 case was filed but till date I am only attending the dates in the court.

  7. Sanjayhira
    I am facing the same problem as above. I file 420 case against my payment and police had not taken any action against my complaint.Although police know all facts about the case. Already several cases filed against the person of cheque dishonour.Law is very
    slow against this lawyer said it may take 5 years to complete the case.I don’t know how person rely on law.

  8. advises, threats and legal actions are always for the common man. I’ll be more happy to hear
    concrete steps that have been enacted for people constantly under light in media and reports

  9. Criminals first issue cheque then they will give letter to bank stating stop cheque, this cannot be treated as bounce cheque. Then what action to be taken…… It is not guarantee to finalise the court case with in 10 yeras also that is indina law. No citizen has faith on our indian law. This leading people to approach local gundas for settlement instead of courts…………

  10. I have taken my client to court due to chq bouncing and the case is going on. My question is that if I win the case but my client does not have the money to repay me, then what happens to him????.
    Is he jailed straight away or does the court give him time to pay up in installments.

  11. I agree with Mr.Tilak suggestion dt.03.06.2018. Necessary amendment is required in IPC, Negotiable Instruments Act and Mumbai Police act to arrest and put behind bar without bail till full payment with 100% penalty is paid to payee over and above 24% interest on cheque amount by drawer of cheque on filing FIR in police station of the payee’s Jurisdiction, otherwise now a day’s drawer are issuing cheque knowing fully well its fate. Amended Negotiable Instrument act does not have nail to neb offender. Police do not act on complain till Judiciary pass order which take more than 10 years due to pending cases.

    • One of my relatives had deposited a Cheque (Rs.10.00 Lac). The Cheque was en-cashed and the funds were credited to my relative’s CLSB account. Subsequently, the money was withdrawn/spent over a period of time. After few months the BANK informed my relative that due to “Mistake in Electronic Clearing System and Staff’s fault”, the money was by mistake credited to the account. The Bank sent a legal notice to refund the Rs.10.00 Lac amount. Bank also Froze the account. (The Party – (A property dealer) who had issued the Cheque owed money to my relative. He has issued the Cheque towards refund of advance.) No intimation regarding the Cheque being Dishonored was received from the Bank. Even the Dishonored Cheque was not received by my relative. The full facts of the case was intimated to the Bank Authorities. But, the Bank has now filed a case in “Debt Recovery Tribunal” & my relative has received a Notice From the DRT. Please advise. (Binaya Bhusan Mohanty – Bhubaneswar, Odisha. Mob: 9437922447 & 7978499318.

  12. Does the payee really cares. I was issued 4 cheques in lieu of salary and all of them bounced. It’s almost 3 years the case was files and since ten 25 hearings have already taken place and the irony is it seems that the accused does not even knows that case under negotiable act has been files against him. This is the condition of our Indian judiciary. All rules are in place the challenge is execution of them. It’s a pathetic state of judiciary and a common man has no place to go.


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