A bounced cheque; officially known as a “dishonored cheque”—is not just a financial inconvenience in Pakistan; it is a criminal offence under the Negotiable Instruments Act, 1881, as amended. The law provides a clear, though often lengthy, legal pathway for the payee (the person to whom the cheque was issued) to seek redress. This article explains the process, your rights, and key considerations.

1. Understanding the Offence: What Makes a Cheque “Dishonored”?

A cheque can bounce for several reasons, but for criminal liability under Section 489-F of the Pakistan Penal Code (incorporated via amendment), the most common ground is “insufficient funds.” Crucially, the law presumes the drawer issued the cheque knowingly and fraudulently if it is returned unpaid due to insufficient funds.

Other reasons for bouncing include:
Account closed
Payment stopped by drawer
Signature mismatch
Post-dated cheque presented early (may have specific defenses)

2. The Legal Process: Step-by-Step

The process is adversarial and moves from a private notice to potential criminal conviction.

Step 1: The Cheque is Dishonored by the Bank
The payee presents the cheque to their bank. If it bounces, the bank returns it with a “Cheque Return Memo” (also called a bouncing memo). This document states the precise reason for dishonor (e.g., “Insufficient Funds,” “Account Closed”) and is crucial evidence.

Step 2: Legal Notice under Section 138 (Negotiable Instruments Act)
Within 30 days of receiving the Cheque Return Memo, the payee (or their lawyer) must send a formal written demand notice to the drawer (the person who issued the cheque). This notice should:
Clearly state the cheque details (number, date, amount, bank).
Mention the dishonor and the reason given by the bank.
Demand payment of the cheque amount.
Be sent via registered post/courier to the drawer’s known address.

Purpose: This gives the drawer one last chance to pay before criminal proceedings begin.

Step 3: Filing a Criminal Complaint
If the drawer fails to make the payment within 15 days of receiving the legal notice, the payee can file a criminal complaint.
Where to File: In the court of a Magistrate First Class (Judicial Magistrate) having jurisdiction (usually where the cheque was drawn, presented, or where the payee resides).
Limitation Period: The complaint must be filed within 30 days of the expiry of the 15-day notice period. Missing these strict deadlines can void your case.

Documents Required:

1. Original dishonored cheque.
2. Original Cheque Return Memo.
3. Copy of the legal notice.
4. Proof of delivery (registered post receipt).
5. Affidavit of the complainant.

Step 4: Court Proceedings & Trial
1. Pre-Trial/Summons: The magistrate examines the complaint and evidence. If a prima facie case is made, the court issues summons for the accused (drawer) to appear.
2. Bail: In bounced cheque cases, the offence is bailable (but not compoundable without court permission at later stages). The accused can typically secure pre-arrest bail.
3. Trial: Both parties present evidence, including bank records, correspondence, and witness testimony. The burden of proof initially lies with the complainant (payee).

Step 5: Outcome & Penalties

If convicted under Section 489-F of the PPC, the penalties are severe:
Imprisonment: Up to 3 years.
Fine: Which may be up to twice the amount of the cheque.
Both: Imprisonment and a fine.

The court may also order the drawer to pay the cheque amount as restitution to the payee.

3. Civil Remedy: A Parallel Avenue

Importantly, the criminal process is for penalizing the act of issuing a dishonored cheque. The payee can simultaneously file a civil suit for recovery of the owed money. A civil suit is based on the underlying debt or liability and seeks a money decree. It is slower but can directly enforce payment.

4. Key Defenses Available to the Drawer

The accused drawer can raise defenses such as:
The cheque was lost or stolen.
It was issued as a security or guarantee, not for immediate payment (this defense is narrowly interpreted).
There was no legally enforceable debt or liability (e.g., the cheque was for a gambling debt).
Full payment was already made.
Signatures were forged.

5. Recent Developments & Practical Challenges

Case Backlog: Courts are overburdened, leading to delays that can span years.
Settlement (Compromise): Parties can settle at any stage, even after conviction. However, for offences under 489-F, the court’s permission is required to compound (settle) the case, which is usually granted upon payment of the due amount and some court fine.
Utility: Despite delays, the criminal provision is a powerful tool for creditors, as the threat of a criminal record and imprisonment often pressures drawers to settle.

Crucial Recommendations

1. Act Immediately: Strictly adhere to the 30-day and 15-day deadlines for notice and complaint.
2. Document Everything: Preserve the original cheque, return memo, and all correspondence.
3. Legal Counsel is Essential: The procedure is technical. Engage a lawyer experienced in banking and criminal law.
4. Consider Negotiation: Before or even during litigation, explore a settlement to recover funds faster, as a trial can be protracted.

Conclusion

Pakistan’s legal framework on bounced cheques is stringent, designed to uphold trust in financial instruments. While the process from bounced cheque to final judgment is demanding and time-consuming, it provides a serious deterrent against fraudulent cheque issuance. Understanding this step-by-step process empowers both businesses and individuals to take informed action to protect their financial interests.

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