Friday, November 1, 2013




Governing Law on Cheque Bounce Cases:

Governing Substantive Law: 
  • The Object of N.I Act is to create an atmosphere of faith and reliance in the banking system. 
  • Negotiable Instrument Act,1881[Special Law–Central Act]- Public Financial Institutions and Negotiable Instruments Laws (Amendment) Act, 1988. 
  • Sections 138 to 142, Chapter XVII, was inserted in the Negotiable Instruments Act, 1881 by an Amending Act, Act 66 of 1988. These sections came into force w.e.f. 29.3.1989[amended after Dr Rajamannar report] 
  • Negotiable Instruments[Amendment  and Miscellaneous Provisions Act, 2002] in short the Act. No 55 of  2002 , Lay down a kind of complete Code for trial of offences under the Negotiable Instruments Act, Whereby additional powers have been conferred upon the court to take cognizance even after expiry of the period of limitation by conferring on it a discretion to waive the period of one month. 
  • Section 143 gave to the court the power to try cases summarily; Section 144 provided for the mode of service of summons; 
  • Section 146 provided that the bank's slip would be prima facie evidence of certain facts. 
  • Section 147 made the offences under the Act compoundable. 
  • Punishment extended up to two years after the second amendment with effect from February 6, 2003:FINE upto twice the amount of cheque.
Governing Procedural Law:

· 1.Criminal Procedure Code,1973
· 2.Indian Evidence Act, 1872.
· 3.The Criminal  Rules of Practice and Circular Orders,1990
[Check state rules/bye laws]
Other Important Allied Acts:

· 1.Indian Limitation, 1963.
· 2.General Clauses Act 1897.
· 3.Bankers' Books Evidence Act, 1891.
· 4.Bills of Exchange Act, 1882.
· 5.Information Technology Act, 2000.[Electronic Cheque]
· 6.Constitution of India [Rights of Accused]

Five Important Elements/Fundamental to be noted in 138 N.I Act :

1Drawing the cheque.
2.Presentation of the cheque to the Bank.
3.Returning the cheque unpaid by the drawee Bank.
4.Giving notice in writing to the drawer of the cheque demanding payment of the cheque amount.
5.Failure of the drawer to make payment within 15 days of the receipt  
 of notice.
The Following are the important stages in a Cheque Bounce case:

A Cheque bounce case normally takes an average of one year to complete the proceedings before trial court.After receiving bank slip of bouncing of cheque, statutory notice to be sent to accused within 30 days of cheque bounce.

1) Filing of complaint: 
  1. Filing of complaints u/s 138 with M.M./A.M.M. 
  2. M.M. verifies the complaints and marked the same to the concerned M.M. / A.M.M.[Fast Tract courts-N.I Act -e.g. Erramanzil Court or Hastinapuram Court, R.R Dist] for further proceedings. 
  3. Accrual of cause of action : Accused not making payment within 15 days from date of receipt of notice, complainant entitled to file complaint within next month from date on which cause of action arose  Clause (c) provisio of 138 N.I. Act. [date of bank intimation excluded in determining the limitation]
  4. The complainant needs to be present before the magistrate at the time of filing. 
  5. The original documents need to be shown to the magistrate.[Bounced returned cheque,Bank Slip-Bank's slip prima facie evidence of certain facts.].
  6. If prima-facie a case is made out, the magistrate will post the matter for sworn statement.

Note:Option of summary trial or summons is available for N.I act case not IPC case,
2) Sworn Statement:
  • At this stage, the complainant needs to enter the witness box and give further details regarding the case. 
  • If the magistrate is satisfied that there is some substance in the case of the complainant, then he will issue a summons to the accused.

3) Appearance of Accused: On receipt of summons:
  • The accused need to appear in the court.[engage a counsel]
  • If he does not appear in the court, the court will issue an arrest warrant against him. 
  • After appearance, the accused is supposed to take a bail from the court with or without sureties.
  • If the accused is unable to furnish a surety then he can deposit a cash security, instead of surety.This cash security is refundable to the accused after the conclusion of the case.
4) Recording of Plea
  • The court will ask the accused as to whether he has committed the offence or not. 
  • If the accused admits the guilt, the court will immediately give him punishment. [u/s 251 Cr.P.C]
  •     If he pleads innocence, the court will post the matter for evidence.
5) Evidence: 

  • The Complainant has to furnish his evidence, normally by way of affidavit; this is known as examination-in-chief. 
  • He needs to produce all documents in support of his case like bounced cheque, dishonor memo,copy of notice etc. 
  • Later complainant will be cross examined by the accused. If there are other witnesses in support of the complainant,then their evidence also has to be recorded.
6) Statement of the Accused

 After the Complainant side evidence is over,the court will   put some questions to the accused regarding his guilt,An accused needs to give his version to the same.

7) Defence Evidence: 
  • After the Accused statement the court will give an opportunity to the accused to leave his evidence.
  • The accused can also produce documents in support of his case, as well as witnesses in his support.
  • Accused and his witnesses will be cross examined by the complainant. After this, the case is posted for arguments.
  • Both  the Complainant and the accused will submit their arguments before the court. 
  • They can also furnish important judgments of High courts and Supreme Court in support of their case.
  • Normally a written argument containing a gist of the oral argument is also furnished to the court.
9) Judgement: 

  • After the arguments,case is posted for judgment.if the court finds that the accused has committed offence,
  • He will be punished with fine or imprisonment.If he is innocent, the court will acquit him.If accused is convicted, then he needs to suspend his sentence, for a period of 30 days with in which time, he can file an appeal before the sessions court.

 Note: Please go through all acts [Manuals] thoroughly  &rules framed there under with latest case [citation of S.C]law for in debt understanding of the cheque bounce litigation.[deviations in some procedures /process may exists in different states,pl check out]

Re-construction& compilation by;
M Ravi Kumar B.A, LL.M,PGDHR
Advocate, A.P High Court  ,HYDERABAD

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