One of my clients recently had a case which I am explaining below and if you are stuck in such similar situation, here is what to do.

Note: Due to attorney-client privilege, I cannot disclose complete case details or identify the actual parties involved. However, I am sharing the essential facts and legal approach so that if you find yourself in a similar situation, you can understand the available solutions and legal remedies.

Mr.X approached me urgently as his brother Mr.Y was facing a cheque bouncing case. Mr.Y had engaged XYZ IT Solutions for developing a mobile application for his business venture. The company delivered substandard work and kept demanding additional payments for basic requirements that should have been included in the original scope. Mr.Y made partial payments in cash and issued cheques worth INR 12 lakhs for the remaining amount. When the app development failed to meet expectations and the company’s demands became unreasonable, Mr.Y stopped the cheque payments. All cheques subsequently bounced, and XYZ IT Solutions filed a case under Section 138 of the Negotiable Instruments Act. The matter was scheduled for hearing in City A court, requiring immediate legal representation.

Advice in Such Cases

Consult with Lawyer: The very basic and important step to start is talk to Lawyer / advocate. You should not hesitate in paying his consultation fee i.e. might be in range of Rs. 10,000 to 50,000 depends case to case. He is helping you in this situation to come out. He is expert in the domain and can help you explain the procedure which you might have never explored. A good lawyer can get the issues resolved much faster than you think.

• Never ignore court summons or legal notices in cheque bouncing cases
• Gather all documentation related to the original transaction and service agreement
• Prepare evidence showing the failure of consideration or breach of contract by the payee
• Consider settlement negotiations before the case proceeds to trial

Applicable Sections of Law

The primary legislation governing this case is Section 138 of the Negotiable Instruments Act, 1881, which makes dishonor of cheques a criminal offense. Under the Bharatiya Nyaya Sanhita (BNS), relevant sections include Section 316 (criminal breach of trust), Section 318 (cheating), and Section 336 (forgery). The Bharatiya Nagarik Suraksha Sanhita (BNSS) governs the procedural aspects, particularly Section 204 (issue of process), Section 173 (police report), and Section 245 (summary procedure for certain offenses). These provisions work together to address both the criminal liability for cheque dishonor and any underlying fraudulent activities.

If You Are the Complainant

• Send a legal notice within 30 days of cheque bouncing demanding payment
• File complaint within 30 days of notice period expiry if payment not received
• Maintain original cheques, return memos, and all correspondence as evidence
• Prepare witnesses who can testify about the transaction and debt
• Document the legal liability and discharge thereof clearly in your complaint

If You Are the Victim

• Challenge the existence of legally enforceable debt through proper documentation
• Prove failure of consideration or breach of contract by the complainant
• Show that cheques were given as security, not for discharge of liability
• Demonstrate that the complainant failed to provide promised services adequately
• Present evidence of fraudulent or deceptive practices by the complainant company

How the Police Behave in Such Cases

Police generally do not investigate Section 138 cases as they are tried summarily by Magistrates. However, if there are additional charges like cheating or criminal breach of trust, police may register an FIR. They typically focus on documentary evidence rather than detailed investigation. Police cooperation is usually limited to serving summons and ensuring court appearance. Most resolution happens through court proceedings and settlement negotiations rather than police intervention.

FAQs People Normally Have

Can I be arrested immediately? No, Section 138 is non-cognizable and bailable. Arrest without warrant is not permitted.

What is the punishment? Imprisonment up to two years or fine up to twice the cheque amount, or both.

Can the case be settled? Yes, compromise is allowed at any stage before conviction, and courts encourage settlement.

What if I have a valid defense? You can prove failure of consideration, absence of debt, or that cheques were security deposits.

What Evidence Is Required?

• Original bounced cheques with bank return memo
• Legal notice sent to accused and postal receipts
• Service agreements and work order documentation
• Bank statements showing insufficient funds or stop payment
• Correspondence between parties regarding the transaction
• Witness statements from persons aware of the deal
• Expert testimony on quality of services provided

How Long Will the Investigation Take?

Section 138 cases must be disposed of within six months from filing, though this is often extended. Initial hearings typically occur within 2-4 weeks of filing. The entire process, including arguments and judgment, usually takes 6-12 months depending on court workload and case complexity. Settlement discussions can resolve matters much faster, often within 2-3 months.

Advocate Sudhir Rao, Supreme Court of India