Cheque Bounce

Whether cheque bounce is a civil or a criminal wrong

There has been a long standing debate as to whether a cheque bounce is a ciivil or a criminal wrong.Since there is punishment prescribed in a 138 case, there is a tendency to conclude that the bouncing of a cheque is a criminal wrong.The Supreme Court has clarified that a cheque bounce is a civil wrong.“This Court has noted that the object of the statute was to facilitate smooth functioning of business transactions. The provision is necessary as in many transactions’ cheques were issued merely as a device to defraud the creditors. Dishonor of cheque causes incalculable loss, injury and inconvenience to the payee, Banking, Public Financial Institutions and credibility of business transactions suffers a setback. At the same time, it was also noted that nature of offence under Section 138 primarily related to a civil wrong and the 2002 amendment specifically made it compoundable.” 

Supreme Court in Seshia vs State of Telangana on Feb1, 2023.