How to Defend Cheque Bounce Case in India

Learn how to defend cheque bounce case in India under Section 138 of the Negotiable Instruments Act. Discover effective legal defences, case laws, and expert tips to fight and win your case.

Cheque bounce cases are among the most commonly litigated issues in Indian courts. Governed by Section 138 of the Negotiable Instruments Act, 1881, these cases arise when a cheque issued by the drawer is dishonoured due to insufficient funds or other reasons. However, every case of cheque dishonour does not lead to a conviction. The law also provides various defences that the accused can raise to rebut the presumption of guilt.

In this article, we will explore the top defences available in cheque bounce cases under Section 138 of the Negotiable Instruments Act, and how a well-structured legal strategy can turn the tide in favour of the accused.

📌 Understanding Section 138: Cheque Bounce as an Offence

Section 138 of the Negotiable Instruments Act, 1881 makes it a punishable offence if a cheque is dishonoured for:

• Insufficient funds, or

• Cheque exceeds the amount arranged, or

• Cheque issued from a closed account, etc.

To constitute an offence, certain legal requirements must be fulfilled:

1. The cheque must have been issued for discharge of a legally enforceable debt.

2. The cheque must be presented within its validity period (3 months).

3. A demand notice must be issued by the payee within 30 days of dishonour.

4. The drawer must fail to make payment within 15 days of receiving the notice.

What is Section 138 for Cheque Bouncing

Section 138 in The Negotiable Instruments Act, 1881

138. Dishonour of cheque for insufficiency, etc., of funds in the account. –

Where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall, without prejudice to any other provisions of this Act, be punished with imprisonment for a term which may be extended to two years, or with fine which may extend to twice the amount of the cheque, or with both:

Provided that nothing contained in this section shall apply unless –

(a) the cheque has been presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier;

(b) the payee or the holder in due course of the cheque, as the case may be, makes a demand for the payment of the said amount of money by giving a notice in writing, to the drawer of the cheque, [within thirty days of the receipt of information by him from the bank regarding the return of the cheque as unpaid; and

(c) the drawer of such cheque fails to make the payment of the said amount of money to the payee or, as the case may be, to the holder in due course of the cheque, within fifteen days of the receipt of the said notice.

Explanation.—
For the purposes of this section, “debt or other liability” means a legally enforceable debt or other liability.]

✅ Common Defences in Cheque Bounce Cases

How to Defend Cheque Bounce Case in India?

Below are some of the most effective legal defences an accused (drawer) can raise in a cheque bounce case:

1. No Legally Enforceable Debt or Liability

This is the most common and powerful defence. The accused can rebut the presumption under Section 139 of the Act by showing:

• The cheque was not issued towards any debt or liability.

• The cheque was issued as a security, not for payment.

• The alleged loan was time-barred, and thus not legally recoverable.

Case Law: Krishna Janardhan Bhat v. Dattatraya G. Hegde [(2008) 4 SCC 54] – The Supreme Court held that the presumption under Section 139 is rebuttable and the burden lies on the accused to prove the non-existence of a legally enforceable debt.

2. Cheque Was Issued as Security

If the drawer can establish that the cheque was issued as a security and not meant to be encashed, the liability under Section 138 does not arise.

This often occurs in cases involving:

• Loan agreements

• Business transactions

• Post-dated cheques for future obligations

The accused must produce documentary or oral evidence supporting the claim of security.

3. Material Alteration of Cheque

Any unauthorised alteration in the cheque, such as changes in date, amount, or name of the payee, without the drawer’s consent, renders the cheque invalid.

Such alterations can be a valid defence under Section 87 of the Negotiable Instruments Act.

4. Cheque Not Signed by the Accused

If the accused can prove that:

• The signature on the cheque is forged, or

• The cheque was not signed voluntarily

then the cheque bounce complaint may not sustain.

Forensic examination of the cheque may be sought to verify authenticity.

5. Post-Dated or Undated Cheques Misused

Sometimes, post-dated or blank cheques issued for future use are misused. If the drawer can show that:

• The cheque was presented prematurely, or

• The cheque was filled without authority

it serves as a good defence.

6. Defective or Invalid Legal Notice

A cheque bounce complaint can be dismissed if the statutory notice under Section 138 proviso (b) is:

• Not sent within the prescribed 30-day period, or

• Lacks essential details (like cheque number, amount, date), or

• Not served properly (wrong address, or no delivery proof)

7. Cheque Presented After Expiry

A cheque presented beyond the validity period (3 months) cannot attract penal provisions under Section 138. The drawer can use bank records or the cheque return memo as proof.

8. Compounding of Offence or Settlement

Under Section 147 of the Act, cheque bounce cases are compoundable, meaning the parties can settle the matter at any stage, including:

• During trial

• At appeal

• Even before Supreme Court

Such settlement leads to acquittal of the accused and closure of the case.

🧾 Important Judicial Precedents

Here are a few key case laws supporting the above defences:

• Rangappa v. Sri Mohan [(2010) 11 SCC 441]: Reiterated that the presumption under Section 139 is rebuttable.

• K. Subramani v. K. Damodara Naidu [(2015) 1 SCC 99]: Held that if the complainant fails to prove legally enforceable debt, accused is entitled to acquittal.

• P. Venugopal v. Madan P. Sarathi [(2009) 1 SCC 492]: Explained that dishonour of cheque given as security does not attract Section 138.

📚 Tips for Drafting a Strong Defence

1. Maintain Proper Documentation – Keep records of all financial transactions.

2. Preserve Cheque Correspondence – WhatsApp, emails, and letters can support your claim.

3. Respond to Legal Notice – A well-drafted reply within 15 days can lay the foundation of your defence.

4. Engage a Skilled Criminal Lawyer – Technical aspects and trial skills matter significantly in such cases.

📈 Final Thoughts

Though cheque bounce is a criminal offence under the Negotiable Instruments Act, the presumption of guilt is not absolute. With the right legal advice and proper evidence, the accused can successfully defend themselves in court.

If you are facing a cheque bounce complaint, don’t panic. Consult an experienced cheque bounce lawyer to explore all available legal remedies and mount a strong defence.

🔍 Frequently Asked Questions (FAQs)

Q1. Is it mandatory to reply to a cheque bounce notice?
👉 While not mandatory, a timely and detailed reply is highly recommended as it can be used as a part of your defence during the trial.

Q2. Can I be jailed for cheque bounce?
👉 Yes, Section 138 provides for imprisonment up to two years, but courts generally prefer fines and settlements, especially for first-time offenders.

Q3. Can a cheque issued as a gift be prosecuted under Section 138?
👉 No. If there is no legally enforceable liability, Section 138 is not attracted

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