Cheque issued by company bounced due to insufficient balance

Yes, when a company issues a cheque that bounces due to insufficient funds, not only the company but also its directors and other officers who were responsible for the conduct of business at the time of the offence can be held personally liable. This is known as vicarious liability under Indian law, and it is a well-established remedy available to payees in such situations.

Key points

• A complaint can be filed against the company and every director, manager, secretary, or officer who was in charge of and responsible for the company's day-to-day affairs at the relevant time.
• A director can escape liability only if they prove they had no knowledge of the offence or that they exercised all due diligence to prevent it.
• You must send a written legal notice to the company (and ideally the liable directors) within 30 days of receiving the cheque dishonour memo from your bank.
• If payment is not made within 15 days of receiving your notice, a criminal complaint must be filed within 30 days of the expiry of that 15-day period.
• The complaint is filed before the Metropolitan Magistrate having jurisdiction, which in your case would be a court in Delhi.

Relevant law

Section 138 (cheque dishonour offence) and Section 141 (offences by companies — vicarious liability of directors and officers) of the Negotiable Instruments Act, 1881 are the primary provisions that apply to your situation.

What you can do

• Obtain the cheque return memo from your bank as documentary evidence of the dishonour.
• Send a formal legal demand notice to the company and the responsible directors by registered post within 30 days of receiving the memo.
• If unpaid, file a criminal complaint before the competent Metropolitan Magistrate Court in Delhi within the prescribed limitation period.
• Consult a lawyer experienced in NI Act matters; you can find qualified advocates listed on LegalFirms to assist you with drafting the notice and complaint.