In India, check bounce cases are governed by Section 138 of the Negotiable Instruments Act, 1881. This law prohibits dishonouring checks for nonpayment or other specified reasons.
Top Landmark Judgments under Section 138 NI Act
1. Dashrath Rupsingh Rathod v. State of Maharashtra (2014)
Citation: (2014) 9 SCC 129
Key Holding: Jurisdiction lies where the drawer’s bank branch is located (i.e., where the cheque was dishonoured).
Impact: Initially restricted where cases could be filed. However, the 2015 amendment reversed this, allowing filing at the payee’s bank location.
2. Kusum Ingots & Alloys Ltd. v. Pennar Peterson Securities Ltd. (2000)
Citation: (2000) 2 SCC 745
Key Holding: Section 138 applies only when a cheque is issued for a legally enforceable debt or liability.
Impact: Clarified that gift cheques or friendly advances without enforceable liability are not prosecutable.
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3. Modi Cements Ltd. v. Kuchil Kumar Nandi (1998)
Citation: (1998) 3 SCC 249
Key Holding: Civil remedies don’t negate the criminal liability under Section 138.
Impact: Enabled simultaneous civil and criminal proceedings for cheque dishonour.
4. Sadanandan Bhadran v. Madhavan Sunil Kumar (1998)
Citation: (1998) 6 SCC 514
Key Holding: Security cheques cannot be prosecuted unless connected to a current legal liability.
Impact: Refined treatment of post-dated or security cheques.
5. MMTC Ltd. v. Medchl Chemicals & Pharma Pvt. Ltd. (2002)
Citation: (2002) 1 SCC 234
Key Holding: Legal notice must be served within 30 days of receiving the return memo.
Impact: Stressed strict compliance with procedural timelines.
6. P. Mohanraj & Ors. v. Shah Brothers Ispat Pvt. Ltd. (2021)
Citation: (2021) 6 SCC 258
Key Holding: Proceedings under Section 138 are barred during the moratorium under IBC.
Impact: Applied Insolvency Code (IBC) moratorium to cheque bounce cases.
7. Rangappa v. Sri Mohan (2010)
Citation: (2010) 11 SCC 441
Key Holding: Section 139 creates a presumption of debt, and the burden is on the accused to rebut.
Impact: Strengthened the complainant’s position by easing the evidentiary burden.
8. M/s. Meters and Instruments Pvt. Ltd. v. Kanchan Mehta (2018)
Citation: (2018) 1 SCC 560
Key Holding: Courts can allow compounding of an offence at any stage.
Impact: Encouraged settlement and decriminalisation of commercial disputes.
9. Indus Airways Pvt. Ltd. v. Magnum Aviation Pvt. Ltd. (2014)
Citation: (2014) 12 SCC 539
Key Holding: Cheques issued for advance payments are not enforceable if the underlying contract is not fulfilled.
Impact: Clarified limits of advance cheque enforceability.
10. Krishna Janardhan Bhat v. Dattatraya G. Hegde (2008)
Citation: (2008) 4 SCC 54
Key Holding: The presumption under Section 139 is rebuttable, and the accused can rebut it based on probabilities.
Impact: Helped provide a fair defence opportunity to the accused.
11. Sampelly Satyanarayana Rao v. Indian Renewable Energy Development Agency Ltd. (2016)
Citation: (2016) 10 SCC 458
Key Holding: If liability existed during presentation, security cheques are valid under Section 138.
Impact: Clarified the timing of enforceability for security cheques.
12. Narayana Menon v. State of Kerala (2006)
Citation: (2006) 6 SCC 39
Key Holding: Notice must be served within 30 days, and a complaint must be filed within 15 days after the notice period ends.
Impact: Reinforced procedural discipline in cheque bounce cases.
13. Yogendra Pratap Singh v. Savitri Pandey (2022)
Context: Minor errors in notice or complaint shouldn’t defeat a genuine case.
Impact: Promoted a liberal interpretation favoring substantive justice over technicalities.
Summary Table: Key Legal Principles in Cheque Bounce Cases
| Case | Legal Principle |
| Dashrath R. Rathod (2014) | Jurisdiction at drawer’s bank branch (overruled by 2015 amendment) |
| Kusum Ingots (2000) | The cheque must be for an enforceable liability |
| Modi Cements (1998) | Civil remedy doesn’t bar Section 138 prosecution |
| Sadanandan Bhadran (1998) | Security cheque not valid unless liability exists |
| MMTC Ltd. (2002) | Notice must be sent within 30 days |
| Rangappa (2010) | Presumption of debt under Section 139 |
| P. Mohanraj (2021) | The IBC moratorium bars prosecution under Section 138 |
| Indus Airways (2014) | Advance cheques are not enforceable without contract fulfilment |
| Sampelly Rao (2016) | Security cheques are valid if liability existed on the date of presentation |
| Meters & Instruments (2018) | Compounding can happen at any stage |
| Narayana Menon (2006) | The complaint must follow the strict procedural timeline |
| Krishna Janardhan Bhat (2008) | The accused can rebut the presumption on the balance of probabilities |
| Yogendra P. Singh (2022) | Minor procedural lapses won’t defeat substantive justice |
Conclusion
Section 138 of the Negotiable Instruments Act helps ensure that cheque payments are honored. Important court decisions have clarified key aspects like where cases can be filed, what counts as a legal debt, when notices must be sent, and how security or advance cheques are treated. These rulings help both payers and receivers understand their rights and responsibilities. Knowing these legal points can help avoid disputes and handle cheque bounce cases more effectively.
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FAQs –
1. Is every cheque bounce a criminal case?
No, only if it involves a legal debt and meets all conditions.
2. Can a security cheque be challenged?
Yes, if there’s a pending payment when it’s presented.
3. Can civil and criminal cases run together?
Yes, both can proceed at the same time.
4. When should notice be sent after a cheque bounces?
Within 30 days of receiving the return memo.
5. Are cheque bounce cases paused during IBC?
Yes, they are stayed during the IBC moratorium.
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