Procedure to be followed when a cheque bounces.

1. Send a letter (a demand notice) to the party who wrote the cheque (the drawer),
threatening to initiate proceedings under the Negotiable Instruments Act (NI Act) if
the amount due is not paid.
2. The demand notice must be sent within 30 days from the date you found out that the
cheque issued to you has bounced.
3. It should contain the following information:
a. Statement that you presented the cheque within its period of validity;
b. Statement of debt or legally enforceable liability;
c. Information about the reason of dishonour of cheque (Check the memo of the
bank returning the cheque for these);
d. Calling upon the drawer to pay the amount due; and
e. Statement that you are giving the drawer 15 days to pay up or you will initiate
legal action.
4. There is no format that is to be followed for the notice.
5. After the expiry of 15 days, a complaint is to be filed to the magistrate 1 st class/
Metropolitan Magistrate within 30 days, U/s. 143 0f NI read with 261-265 of CPC.
6. Jurisdiction:
a. Where the cheque was drawn.
b. Where the cheque was presented.
c. Where the cheque was returned by the bank.
d. Where the demand notice was served by you.
7. The following documents are to be attached with the complaint for verification by the
court:
a.
b.
c.
d.
e.

original dishonoured cheque,

bank memo/intimation of dishonor,
copy of statutory notice issued for demand,
proof of service of demand notice
necessary averment in the Complaint /Affidavit stating that the Issuer has
failed to pay the amount demanded in the demand notice within stipulated

period.
8. Format for the complaint has been attached as a separate document in the mail sent.
9. Sangeetaben vs State of Gujarat.
A cheque issued for the repayment of a loan was dishonoured by the bank. The payee
filed a complaint under Section 138 of the Negotiable Instruments Act. He went
ahead and filed complaints of breach of trust, cheating and abetment which are
offences under the Indian Penal Code. The drawer of the cheque was convicted under
the bank law, though an appeal is pending. Then he moved the high court for

quashing the criminal complaints under the penal code since he has already been
prosecuted under the bank law.
This raises the question of double jeopardy. There are strong reasons for providing
this protection to people. It prevents the government from exercising its power to
wear down and convict innocent people. Citizens are protected from the financial,
emotional and social consequences of successive prosecutions. The principle also
gives finality to criminal proceedings. the Supreme Court maintained that both
proceedings can go on simultaneously. This is because the bank law and the code
operate in different fields. For instance, there is no need to prove the guilty mind of
the accused person in the case of a dishonoured cheque. But in cheating and breach of
trust, it is essential to prove this. Further, punishment for offences under the code is
severe. In the cheque case, a fine may be imposed to meet the liability. The cheque
complaint is initiated by an aggrieved person, whereas in the other instances, it is the
state that takes action.
10. G Sagar Suri vs State of UP, the court quashed the criminal proceedings for cheating
and breach of trust when the cheque-bounce case was going on, observing that it
would amount to abuse of the process of law.
11. The law therefore is on crossroads on the issue of jeopardy.
12. There are no other proceedings or sections under which the defaulter can be
prosecuted except for section 138 of NI. The least that could be done is, if the
defaulter is proved to be insolvent as per Section 6 of Insolvency Act, then he could
be prosecuted for insolvency under the said Act.
13. There is no specific amount of interest that could be charged, rather no interest as

such could be charged on the defaulter, only penalty is through a fine imposed by the
court which is twice the amount of the cheque bounced or a maximum of 2 years of
imprisonment or both.