Bounced Cheque Claim in Company Insolvency Proceedings

If a company that owes you money has just entered corporate insolvency resolution, a bounced cheque stops being only a Section 138 problem. You are now an operational creditor, and your first task is to file a cheque bounce claim in insolvency with the resolution professional before the date in the public announcement. The cheque is evidence of the debt, not a separate claim. The Insolvency and Bankruptcy Code, 2016 treats an unpaid supplier as an operational creditor under Section 5(20), and the claim is an operational debt if it arises from goods or services you supplied. Miss the process and you may recover nothing.

Filing a Cheque Bounce Claim in Insolvency With the RP

When the NCLT admits a company into corporate insolvency resolution process (CIRP), it imposes a moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016. The resolution professional (RP) then issues a public announcement under Section 15 inviting claims. An operational creditor must submit its claim in Form B, with proof, by the last date stated in that announcement. Form C is for financial creditors. A supplier of goods or services who holds a bounced cheque normally files Form B.

The cheque does not create a new head of claim. If the cheque was issued towards invoices for goods supplied, the claim is the unpaid operational debt, whether or not the cheque amount equals the invoice value. If the cheque was part payment, claim the full unpaid principal and any contractual interest. If the cheque was issued to repay a loan, the debt may be financial rather than operational, and the claim should be in Form C. The distinction matters because operational creditors ordinarily do not vote in the committee of creditors.

Send the claim to the RP email address given in the announcement. Attach the cheque, the bank return memo, the demand notice, the complaint if filed, invoices, delivery proof, ledger and bank statement. Ask for a written acknowledgement. The RP may admit the claim in full, admit it in part, or reject it. A rejection is not the end of the criminal case, but it affects your share of any resolution plan.

Section 138 Case After CIRP Commencement

A common fear is that the moratorium kills the Section 138 of the Negotiable Instruments Act, 1881 complaint. It does not, ordinarily. In P. Mohanraj v. Shah Brothers Ispat Pvt. Ltd., the Supreme Court held that the Section 14 moratorium does not bar a Section 138 prosecution because the offence is criminal in nature, not a suit for recovery of money. The criminal court continues to deal with the complaint. The RP does not adjudicate it.

The company cannot be sent to prison because it is a juristic person. The persons in charge of the company at the time of the offence can be prosecuted, and that personal liability is not automatically erased by CIRP. After a resolution plan is approved, Section 32A of the IBC may extinguish the corporate debtor liability for offences committed before CIRP, but it does not automatically protect directors or signatories. Do not withdraw a Section 138 complaint merely because a claim has been filed with the RP. Take separate advice on the complaint.

Proving the Debt With Cheque, Invoices and Ledger

The RP is not a court. Claim verification is a documentary exercise, so a cheque and a return memo alone may not be enough. The RP will ask what debt the cheque was meant to pay. Build a short paper trail: the invoice, the purchase order, the delivery challan or e-way bill, the ledger extract, the bank statement showing earlier payments, GST returns if available, and emails acknowledging the dues. If the cheque was post-dated or given as security, say so in the covering letter and explain the underlying transaction.

Take a supplier, Sunrise Components Pvt Ltd, which supplied auto parts to Meridian Engineering Ltd. Invoices dated 12 January 2025 to 28 March 2025 total ₹18,40,000. Meridian paid ₹6,40,000 and gave a cheque dated 12 May 2025 for ₹12,00,000. The cheque was returned on 15 May 2025 for insufficient funds. Sunrise sent a Section 138 notice on 10 June 2025 and filed a complaint on 18 July 2025. On 22 August 2025, the NCLT admitted Meridian into CIRP. The public announcement set 8 September 2025 as the last date for claims.

Sunrise filed Form B for ₹18,40,000 with the invoices, ledger, bank statement, cheque and return memo. The RP admitted the claim at ₹18,40,000. The approved resolution plan paid operational creditors 8%, so Sunrise received ₹1,47,200. The shortfall was ₹16,92,800. The Section 138 case continued against the company and its directors, but it did not change the admitted claim or the plan payout.

Recovery Waterfall and the Shortfall

In CIRP, distribution is not made directly under Section 53. The resolution plan must provide for operational creditors an amount not less than what they would have received in liquidation, as required by Section 30(2)(b). In a liquidation, Section 53 places trade payables in the residual category of remaining debts and dues, after insolvency costs, workmen dues, employee wages, unsecured financial debts and government dues. A bounced cheque does not move you up that waterfall unless you have separate security.

This is why the admitted claim and the recovery are different numbers. A ₹20 lakh claim may receive 5% or 10% in a resolution plan, and sometimes nothing. Once the plan is approved under Section 31, it binds the corporate debtor and its stakeholders. The unpaid shortfall is generally not recoverable from the corporate debtor thereafter. You may have a separate right against a personal guarantor or another obligor, subject to the terms of that guarantee and any moratorium applicable to that person.

Practical Deadlines and Record-Keeping

Treat the public announcement as the starting gun. The date for claims is usually short, and the RP is not obliged to entertain a late claim after the committee of creditors has approved a plan. Keep the Section 138 timetable running in parallel: the demand notice must be sent within 30 days of the return memo, and the complaint must be filed within one month of the cause of action. CIRP does not pause those criminal deadlines.

• Download the public announcement and note the claim last date, RP email and Form B.

• Prepare a claim letter with a clear principal, interest and total, and attach a calculation sheet.

• Attach the cheque, bank return memo, demand notice, invoices, delivery proof, ledger and bank statement.

• Send the claim to the RP before the last date and keep the acknowledgement and sent email.

• Keep the Section 138 complaint alive and diarise every criminal court date.

• Track the CoC minutes and the resolution plan for the operational creditor payout.

Common mistakes

Filing Form C for trade dues delays verification. Claiming the cheque amount as well as the full invoice amount double counts the same debt. Waiting for the criminal case before filing with the RP usually loses the claim date. Sending only the cheque without invoices invites a rejection. Assuming the RP will pursue the Section 138 case is wrong: the complainant must do that.

If you hold a bounced cheque of a company now in CIRP, send Form B to the resolution professional today with the cheque, return memo and underlying invoices, and keep the Section 138 case on a separate diary. This article is for general information only and is not legal advice. Consult a qualified professional for your specific facts.