Section 25 – Dishonour of Electronic Funds Transfer for Insufficiency of Funds, etc.

Bare Provision (Simplified):
Section 25 provides that if any person issues an instruction for payment through an electronic funds transfer (EFT) (including ECS – Electronic Clearing Service), and it is dishonoured because:

Insufficient funds in the account, or
It exceeds the arrangement with the bank,

Then such dishonour attracts criminal liability, similar to dishonour of cheque under Section 138 of the Negotiable Instruments Act, 1881.

Key Ingredients of Section 25

For prosecution under Section 25, the following conditions must be fulfilled:

EFT Instruction issued – The drawer/accountholder must have issued an ECS/EFT mandate towards discharge of a legally enforceable debt or liability.
Dishonour – The EFT is dishonoured due to:
1. Insufficient funds, or
1. Exceeds arrangement with the bank.
Notice – The payee/beneficiary must issue a written demand notice within 30 days of receiving information about dishonour.
Failure to Pay – The drawer fails to make payment within 15 days of receipt of notice.
Complaint Filing – Complaint must be filed within 1 month from the date on which cause of action arises (i.e., after expiry of 15 days from notice).

Punishment under Section 25

Imprisonment: Up to 2 years, or
Fine: Up to twice the amount of the EFT, or
Both.

Important Points

Proceedings under Section 25 are almost identical to Section 138 NI Act.
The jurisdiction is determined in the same manner as cheque bounce cases (Section 142 NI Act applies mutatis mutandis).
Post-dated ECS instructions are also covered, just like post-dated cheques.

Case Law Reference

Laxmi Dyechem v. State of Gujarat (2012) 13 SCC 375 – Although primarily under NI Act, the SC clarified that dishonour due to “stop payment” or “account closed” also attracts liability. Courts often apply the same principle to Section 25 matters.
ICICI Bank v. NEPC India Ltd. (2009) 2 SCC 782 – Even electronic modes of payment dishonoured for insufficiency of funds can attract penal provisions.

In Short:
Section 25 makes ECS/EFT bounce legally equivalent to cheque bounce.
Same ingredients, same procedure, same punishment.

Comparison: ECS Bounce vs Cheque Bounce

Point	Section 25 – PSS Act, 2007 (ECS Bounce)	Section 138 – NI Act, 1881 (Cheque Bounce)
Mode of Payment	Electronic Funds Transfer (EFT) / ECS mandate.	Physical cheque issued by drawer.
Reason for Dishonour	– Insufficient funds in account. – Exceeds arrangement with bank.	– Insufficient funds in account. – Exceeds arrangement with bank.
Legally Enforceable Liability	EFT must be towards a legally enforceable debt/liability.	Cheque must be towards a legally enforceable debt/liability.
Notice Requirement	Payee must send written demand notice within 30 days of dishonour information.	Same – 30 days to send demand notice after dishonour.
Time to Pay after Notice	Drawer must make payment within 15 days of receipt of notice.	Same – 15 days to make payment.
Cause of Action	Arises on expiry of 15 days if payment not made.	Same – cause of action arises on expiry of 15 days.
Filing of Complaint	Within 1 month from the date when cause of action arises.	Same – within 1 month of cause of action.
Punishment	Imprisonment up to 2 years OR fine up to twice the amount of EFT OR both.	Imprisonment up to 2 years OR fine up to twice the amount of cheque OR both.
Jurisdiction	Complaint filed in court where payee’s bank branch is situated (same as NI Act after 2015 amendment).	Complaint filed in court where payee’s bank branch is situated (post 2015 NI Act amendment).
Applicable Law	Payment and Settlement Systems Act, 2007, Section 25.	Negotiable Instruments Act, 1881, Section 138.
Nature of Offence	Criminal offence (compoundable).	Criminal offence (compoundable).

Key Takeaway for Court Arguments:

Both provisions are mirror images of each other.
Section 25 (ECS bounce) is treated pari materia with Section 138 (cheque bounce).
All procedural safeguards & timelines are the same.

Draft Complaint under Section 25, PSS Act, 2007

(For ECS Bounce)

IN THE COURT OF THE [Metropolitan Magistrate/Judicial Magistrate First Class] AT [Place]

Case No. : _____ of 20__

[Name of Complainant]
S/o/D/o/W/o __________,
R/o _____________________________ ……… Complainant

Versus

[Name of Accused]
S/o/D/o/W/o __________,
R/o _____________________________ ……… Accused

Complaint under Section 25 of the Payment and Settlement Systems Act, 2007

The Complainant Most Respectfully Submits as Under:

That the Accused is known to the Complainant and had approached the Complainant for a friendly loan/business transaction/consideration for goods and services, and in discharge of his legally enforceable liability, the Accused issued an Electronic Clearing Service (ECS) mandate in favour of the Complainant for a sum of ₹[amount] payable on [date].
That the said ECS mandate was presented by the Complainant’s bank i.e. [Bank Name, Branch], but the same was returned dishonoured with remarks “Funds Insufficient/Exceeds Arrangement/Stop Payment” vide return memo dated [date].
That upon dishonour, the Complainant issued a legal demand notice to the Accused on [date], within the statutory period of 30 days from the date of dishonour, calling upon the Accused to make the payment of ₹[amount] within 15 days of receipt of the said notice.
That despite service of the said notice, the Accused has failed and neglected to make payment of the aforesaid amount within the statutory period of 15 days, thereby making himself liable to be prosecuted under Section 25 of the Payment and Settlement Systems Act, 2007.
That the cause of action for filing the present complaint arose on [date], when the statutory period of 15 days expired and the Accused failed to pay the legally enforceable liability.

Jurisdiction

That this Hon’ble Court has jurisdiction to try and entertain this complaint as the Complainant’s bank, where the ECS was presented, is situated within the territorial jurisdiction of this Hon’ble Court.

Prayer

In view of the above facts and circumstances, it is most respectfully prayed that this Hon’ble Court may be pleased to:

a) Take cognizance of the offence committed by the Accused under Section 25 of the Payment and Settlement Systems Act, 2007;
b) Summon, try, and punish the Accused in accordance with law;
c) Award cost of proceedings in favour of the Complainant; and
d) Pass any other order(s) as this Hon’ble Court may deem fit and proper in the facts and circumstances of the case.

Verification

I, [Name of Complainant], do hereby verify that the contents of paras 1 to 6 of the above complaint are true and correct to my knowledge and belief, and nothing material has been concealed therefrom.

Place: ___________
Date: ___________

Complainant
Through Counsel
[Advocate’s Name & Signature]

Punishment Reminder:

Imprisonment up to 2 years, or
Fine up to twice the amount, or
Both.

step-by-step procedure for filing and pursuing an ECS bounce case under Section 25 of the Payment and Settlement Systems Act, 2007 (similar to Section 138 NI Act process).

Step-by-Step Procedure for ECS Bounce Case

(Section 25, Payment & Settlement Systems Act, 2007)

1. Cause of Action: Dishonour of ECS Mandate

When an ECS mandate / electronic debit instruction is dishonoured due to:
- Insufficient funds
- Exceeds arrangement
- Stop payment
- Any other reason
The bank issues a Return Memo with dishonour reason.

Example:
Mr. A issued an ECS mandate of ₹1,00,000 in favour of Mr. B. On presentation, the ECS bounced with “Funds Insufficient” on 1st August 2025.

2. Legal Demand Notice

Complainant must send a written demand notice to the Accused within 30 days of receiving information of dishonour.
Notice must demand payment of the dishonoured amount within 15 days of receipt.
Send via Registered Post / Speed Post / Courier + Email (if possible).
Keep postal receipt & acknowledgment as evidence.

Example:
Mr. B sent a demand notice on 10th August 2025 asking Mr. A to pay within 15 days.

3. Waiting Period

Accused gets 15 days to make payment.
If payment is made, matter ends.
If payment is not made, cause of action arises after expiry of 15 days.

Example:
Notice received by Mr. A on 12th August 2025 → he had time till 27th August 2025. No payment was made. Cause of action arose on 28th August 2025.

4. Filing of Complaint

Complaint must be filed within 1 month from the date cause of action arises (i.e., expiry of 15 days).
File complaint before the Judicial Magistrate First Class (JMFC) / Metropolitan Magistrate having jurisdiction.
Complaint must include:
- Complaint petition (draft I gave you earlier)
- Copy of ECS mandate
- Dishonour memo from bank
- Copy of legal notice & postal proof
- Proof of service of notice
- Affidavit of complainant

Example:
Mr. B filed complaint on 10th September 2025 → within limitation.

5. Court Process

Pre-summoning Evidence:
1. Complainant files affidavit + documents.
1. Magistrate examines prima facie case.
Issuance of Summons:
1. If satisfied, Magistrate issues summons to the Accused.
Appearance of Accused:
1. Accused appears or is compelled by bailable warrant.
Notice under Section 251 CrPC:
1. Substance of accusation explained to Accused.
Defence of Accused:
1. Accused may take defences like:
  1. No legally enforceable liability
  1. ECS given as security, not for debt
  1. Payment already made
  1. Notice not served properly
Evidence Stage:
1. Complainant produces witnesses and documents.
1. Accused produces defence evidence.
Arguments & Judgment:
1. Court decides whether offence under Section 25 is made out.

6. Punishment

If held guilty, Accused may face:

Imprisonment up to 2 years, or
Fine up to twice the dishonoured amount, or
Both.

7. Appeal / Revision

Conviction or acquittal can be challenged in Sessions Court within 30 days.

8. Execution of Sentence

If fine is imposed and unpaid → recovery as arrears of land revenue or civil decree.
If imprisonment awarded → warrant of commitment to jail.

Important Case Law

Laxmi Dyechem v. State of Gujarat, (2012) 13 SCC 375 – Principles of cheque dishonour equally apply to ECS bounce cases.

Summary Flowchart:

ECS Bounce → Notice within 30 days → Wait 15 days → Complaint within 1 month → Court Trial → Conviction/Acquittal → Appeal → Execution

ECS Bounce Case – Timeline & Deadlines

Step	Provision	Time Limit	Action Required
1. Dishonour of ECS	S.25 PSS Act	Day 0	Bank issues return memo → complainant receives info of dishonour.
2. Legal Notice	Proviso (b) to S.25	Within 30 days from dishonour info	Send demand notice to drawer (registered post / courier / email).
3. Payment Period	Proviso (c) to S.25	15 days from receipt of notice	Drawer must pay the dishonoured amount.
4. Cause of Action	Proviso (c) to S.25	Day 16 after receipt of notice	If no payment → offence deemed committed.
5. Filing Complaint	S.142 NI Act (read with S.25 PSS Act)	Within 1 month from cause of action	File complaint before JMFC / MM with supporting docs & affidavit.
6. Court Process Begins	CrPC	Depends on court	Pre-summoning evidence → Summons → Trial → Judgment.

llustrative Example

01 Aug 2025 → ECS dishonoured.
10 Aug 2025 → Notice sent (within 30 days).
12 Aug 2025 → Notice received by drawer.
27 Aug 2025 → 15 days expire.
28 Aug 2025 → Cause of action arises.
27 Sep 2025 → Last date to file complaint (within 1 month).

If complaint is filed on or before 27 Sep 2025, it is within limitation.

Quick Reference Notes

Notice defect = case fails (check amount, date, party details carefully).
ECS mandate = cheque equivalent once dishonoured.
Condonation of delay possible if complaint filed late, but must show sufficient cause (Section 142 NI Act applies mutatis mutandis).
Punishment: Imprisonment up to 2 years OR fine up to 2× amount OR both.

This chart is perfect for desk use—you can quickly calculate last dates in any ECS bounce matter.

Usha Vats & Associates | Best Female Advocates in Dwarka Court

Section 25 of the Payment and Settlement Systems Act, 2007