Updated: Jan 28
1. There must be a liability of payment of the drawer(person issuing the cheque) prior to issuing of the cheque, i.e. there must be an existing liability or debt. A cheque drawn/issued as a gift does not constitute an existing liability or debt and hence no case of dishonor of cheque can be made out. 2. The cheque must have been drawn/issued for discharge of such existing liability or debt. 3. The cheque must be presented for clearance within six months (6 months) from the date of its issuance. 4. The cheque must have returned unpaid due to insufficiency of funds. 5. A legal notice disclosing the fact of dishonor be sent to the drawer within thirty days (30 days) from the date when it was returned unpaid due to insufficiency of funds. The legal notice must be sent preferably through 'Registered Post' or any other government postal service because when a notice sent through government postal modes return unclaimed, there is a presumption of service; service need not be proved explicitly before the court. 6. In the said legal notice a demand be made for making payment of the amount due against the drawer within a period of fifteen days (15 days) from the date of receipt of legal notice. 7. If the drawer fails to make payment within the stipulated time of 15 days, only then can prosecution start. 8. The liability of the drawer subsists even if he closes his account before clearance of the cheque. "Account closed" status is construed in the same way as "insufficient funds" status. Hence a person who, after issuing a cheque, closes his account before clearance would meet the same fate as that of a person who could not maintain sufficient balance in his account to clear his liabilities/debts. 9. The case for dishonor of cheque may be filed in the following places: (a) Where the cheque is drawn. (b) Where the payment has to be made. (c) Where cheque is presented for payment. (d) Where cheque is dishonored. (e) Where notice is served upon the drawer. 10. It is only after the notice is served and the payment is not made within stipulated 15 days time that a case for dishonor of cheque may be filed. Complaint for such cases is to be made within 30 days after expiry of 15 days stipulated time. 11. The punishment for cheque bounce is imprisonment upto 2 years and fine which may be TWICE THE AMOUNT OF CHEQUE.