A cheque bounce, also known as dishonor of a cheque, occurs when a bank refuses to honor a cheque due to insufficient funds, mismatched signatures, overwriting, or other banking issues. This is a serious financial offense under the Negotiable Instruments Act, 1881, particularly Section 138.

Legal Framework for Cheque Bounce Cases

1. Section 138 of the Negotiable Instruments Act, 1881

• If a cheque is dishonored due to insufficient funds or other valid reasons, it is considered a legal offense.
• The payee (cheque receiver) has the right to take legal action against the drawer (cheque issuer).

2. Procedure for Filing a Case

• The payee must send a demand notice to the drawer within 30 days of receiving the dishonor memo.
• The drawer has 15 days to make the payment after receiving the notice.
• If payment is not made, the payee can file a complaint within 30 days in a magistrate’s court.

Legal Consequences of Cheque Bounce

🔴 Criminal Liability: Up to 2 years of imprisonment or a fine up to twice the cheque amount, or both.
🟢 Civil Liability: The payee can file a civil suit to recover the cheque amount, interest, and legal expenses.
⚠️ Bank Restrictions: Repeated dishonored cheques can lead to account restrictions or denial of new chequebooks.
📉 Credit Score Impact: A bounced cheque negatively affects financial credibility and future loan approvals.

Defenses Against Cheque Bounce Charges

• A drawer accused of issuing a bounced cheque may defend themselves by proving:
• The cheque was issued without legal liability (e.g., as a gift or security).
• The cheque was forged or altered without their consent.
• The payee failed to follow legal procedures, such as sending a notice on time.

Remedies for the Payee

• Case Under Section 138: A strong legal action if the drawer fails to pay.
• Civil Suit for Recovery: File a case in civil court for financial compensation.
• Alternative Dispute Resolution (ADR): Negotiation, mediation, or arbitration to resolve disputes outside court.

Preventive Measures to Avoid Cheque Bounce

• Ensure sufficient funds before issuing cheques.
• Use correct signatures and avoid overwriting.
• Monitor bank transactions regularly.
• Prefer digital payments for better security and accountability.

Conclusion

A cheque bounce can lead to serious legal and financial consequences. Both issuers and recipients must understand their rights and obligations under the law. If you are facing a cheque bounce issue, it is advisable to seek legal assistance from an expert advocate to ensure proper legal proceedings.

Need Legal Help? Contact Best Cyber Lawyer in Jaipur – Advocate Pankaj for expert advice on cheque bounce cases.