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Cheque Bounce and Section 138 NI Act: Detailed Legal Analysis with Recent Case Law By Abhishek Jat, Advocate, Gwalior High Court What is Cheque Bounce? A cheque bounce, or dishonour of cheque, happens when a cheque presented to the bank is returned unpaid. The most common reason is insufficient funds in the account, but other grounds include mismatched signatures, overwriting, stale or post-dated cheques, or stop-payment instructions. Cheque bounce disrupts financial reliability and can have serious legal consequences for the drawer, especially under Indian law. Legal Framework: Section 138 of the Negotiable Instruments Act Section 138 of the Negotiable Instruments Act, 1881, criminalizes the act of issuing a cheque that is dishonoured for insufficient funds or if it exceeds the arrangement with the bank. The law aims to ensure the credibility of cheque transactions and penalize those who issue cheques without maintaining adequate funds. The penalty can include imprisonment up to two ...

  Technical Errors in Cheques Do Not Invalidate Legal Proceedings: Delhi High Court By Abhishek Jat, Advocate In a significant ruling, the Delhi High Court has clarified that minor discrepancies in the amount mentioned in words and figures on a cheque, or overwriting of the date, do not render the cheque invalid under the Negotiable Instruments Act, 1881 (NI Act). The judgment, delivered by Justice Neena Bansal Krishna, underscores the importance of substance over technicalities in cases involving dishonored cheques. Background of the Case The petitioner filed a complaint under Section 138 of the NI Act against Respondent 2, alleging that a cheque issued for Rs. 4,65,000 was dishonored with the remark “payment stopped by the drawer.” The cheque was issued to discharge a loan liability of Rs. 5,00,000. However, the cheque contained a discrepancy: while the amount was written as Rs. 4,65,000 in figures, it was stated as “Rupees Four Lac Sixty-Five only” in words. Additionally, ...