How to proceed with the case when you are a surety to a cheque bounce case?


There are manifold reasons for the dishonor of cheques by banks but there is statutory mandate upon the payee under Section 13 (b) of Negotiable Instruments Act for giving a notice demanding the payment of the amount of said cheque, within 15 days from the date of the information as to bouncing of the said cheque from the drawer of the cheque and upon failure to make payment of the amount by the drawer within 15 days, offence under section 138 is deemed to have been committed.

Moreover the decision of the Supreme Court in Electronics Trade & Technology Development Corporation Ltd
is explicit and has decided all sorts of controversies in relation to bouncing of the cheque due to payment stopped by the drawer. It has expressly held that if on issuance of the notice by the payee or the holder in due course after dishonour, to the drawer demanding payment within 15 days from the date of the receipt of such a notice, if he does not pay the same, the statutory presumption of dishonest intention, subject to any other liability, stands satisfied.

Whatever may be the ground or reason on the basis of which the cheque is dishonoured by a bank, whether it may “stopped payment by drawer” or “signature differ” or any other ground the offence under the section is made out and the drawee has full right to initiate proceedings under Section 482 of Code of Criminal Procedure and while deciding the case the Court should see that whether payment has been made by the drawer within 15 days of notice issued by the drawee after the dishonour of cheque.

The complaint should be registered in a magistrateÕs court within a month of the expiry of the notice period.

A case of cheque bouncing can only be made out in cases where there is a legally enforceable debt meaning thereby that a Cheque Bouncing case can only be instituted for a cheque that was issued for some debt / liability that can be legally enforced.
Liability of surety is same as that of the principal debtor. A creditor can directly proceed against the surety. A creditor can sue the surety directly without sueing principal debtor. Surety becomes liable to make payment immediately when the principal debtor makes default in such payment.
However, primary liability to make payment is of the principal debtor, suretyÕs liability is secondary. Also, where the principal debtor cannot be held liable for any payment due to any defect in documents, then surety is also not responsible for such payment.

Reference: According to Section 138 of the Act, the dishonour of cheque is a criminal offence and is punishable by imprisonment up to two years or with monetary penalty or with both.

Section 138 of the Negotiable Instruments Act is a penal provision wherein if a person draws a cheque on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part of any debt or other liability, is returned by the bank unpaid, on the ground either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence.
However with regard to “Payment stopped by the drawer” this section does not mention anything specifically.



Ask FREE question
Ask Question
Eg - Start with How, Why, What, Should I, When will...? etc
Thank you.  Please share the below details
* If you are outside India, mention WhatsApp Number with Country Code
Place of Property / Employment / Legal Issue / Residence / Your City