A cheque is one of the most common and trusted ways to transfer money through banks in India. However, sometimes the cheque may bounce, which means the bank refuses to process the payment. This can lead to legal trouble and financial penalties. It is important to know what causes cheque bounce and what the legal steps are in such cases.
What Is Cheque Bounce and Why Does It Happen?
A cheque bounce happens when the bank refuses to clear the cheque. The most common reason is insufficient balance in the issuer’s account. Other reasons include:
- Signature mismatch
- Overwriting on the cheque
- Expired or damaged cheque
- Incorrect details
These issues make the cheque invalid, and the payment is not processed.
What Happens After a Cheque Bounces?
When a cheque bounces, the bank issues a return memo explaining the reason for the failure. The person expecting the money (the payee) can then send this memo to the cheque issuer along with a notice asking for payment.
If the cheque amount is not paid within 30 days of receiving this notice, the payee has the legal right to take the matter to court.
Legal Action Under Section 138 of the NI Act
The legal process for cheque bounce cases is handled under Section 138 of the Negotiable Instruments Act, 1881. After sending a notice, the cheque issuer gets 15 days to respond and make the payment.
If they fail to do so, the payee can file a criminal case in the court. This marks the beginning of the legal process.
What Is the Punishment for Cheque Bounce?
Cheque bounce is a punishable offense in India. If found guilty under Section 138, the court may order:
- Up to 2 years of imprisonment
- A fine up to double the amount of the cheque
- Or both imprisonment and fine
The court may also ask the cheque issuer to pay interest on the amount due.
Bank Penalty for Cheque Bounce
Apart from legal action, the bank may also charge a penalty for cheque bounce. This amount is usually deducted from the issuer’s account automatically. The penalty amount varies from one bank to another.
Validity Period of a Cheque
A cheque must be presented to the bank within 3 months of its issue date. After this period, the cheque becomes invalid and cannot be cashed or deposited.
Cheque bounce may seem like a minor issue, but it can lead to serious legal and financial trouble. To avoid such situations:
- Always ensure your account has sufficient balance
- Fill the cheque correctly without errors
- Avoid overwriting and sign clearly
- Remember the 3-month validity period of a cheque
Understanding the process and your rights can help you handle such matters with confidence and avoid unnecessary legal action.
