Questions Legal

What is the punishment for cheque bounce in India?

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Airtract

Shahid Raza

Tagline Not available

As cheque bounce is a Cognizable offence under Section 138 of the Negotiable Instrument Act, 1881 and is punishable with an imprisonment for a term which may be extended to two years, or with fine which may extend to twice the amount of the cheque, or with both.

Airtract

Manyatha Gupta

Boss Lady

A bounced cheque is used to represent a cheque that is not liable to get considered due to lack of capital in account or mismatch of signature etc. This is deemed to be criminal malfeasance since this apparently imply fraudulent interferences. Even though online transactions and cash payment systems are extensively accessible in the new generation, cheques are still broadly used for loan payment, salary, real estate sectors, bills, fees, etc. If the cheque is not registered as Account Payee Only, the cheque can be misused if fallen into the wrong hands.

Cheque bounce cases are profusely enhancing in courts in India with almost 40 lakh cheque bounce pending cases as per reports of the Supreme Court.

Conditions under which a cheque is bounced,

  • Insufficient funds    - When the account doesn't have enough money to pay the written amount in the cheque.
  • Irregular signature  - When the specimen signature and signature in the cheque mismatch.
  • Post-dated cheque  - When the date on the cheque is before the activation date of the cheque.
  • Stale cheque           - The cheque will be dishonored if the cheque is submitted after three months from the date written on the cheque.
  • Frozen account        - The bank won't accept the cheque if it is connected to a bank account frozen by the government or bank due to certain reasons.

What happens if the cheque is dishonored?

  • Once a cheque is rejected, the drawee bank will send a Cheque Return Memo to the recipient banker.

  • This will also specify the cause of why the drawee bank didn’t approve of the cheque for payment. 

  • The payee banker will give the retired cheque and Cheque Return Memo to the recipient.

  • The payee can resubmit the cheque once again within 3 months gap if he is confident that it will be honored next time.

  • But if the issuer rejects the cheque again, then the payee or holder can charge litigation against the drawer.

  • The payee can perform so for dishonoring of active cheque under the condition that he is sure of the legal viability of the cheque.

So if you have collected a cheque that has bounced, send a demand notice to the payee who wrote the cheque, intimidating to begin actions under the Negotiable Instruments Act (NI Act), 1881 if your payment is still due. You can always seek the assistance of a lawyer to understand the legal possibilities of the complaint. There are several online platforms that assist in legal as well as other areas like Airtract. Airtract will connect you with corresponding expertise as per your requirement.

The intimidation of prosecution usually results in immediate compensation. You must send the demand notice within 30 days from the date your check was bounced. It intends is to prompt payment and acquaint the issuer that he will be indicted if payment is not made within 15 days.

Punishment for Bounced Cheque

The law dealing with the dishonor of cheque is fallen under The Negotiable Instruments Act, 1881. If the case reaches the court with complaint file, affidavit and supporting documents, the court will call for both parties for summons and hearings. The penalties may include

  1. Imprisonment up to 2 years

  2. Refund of money in double the amount or same amount as written in cheque

  3. Fine up to 10,000 depending on the court hearing

There are several legal sides to cheque bouncing cases. The legal base of the case can change depending upon the conditions of the payee and drawer. 






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