What is a dishonoured of cheque? (Cheque Bounce)

This article will help you to understand the rules of Cheque Bounce. cheque is a written commitment made by the payer to the payee against a sum of money. The payee, also known as the drawee, deposits this cheque in the bank. In an ideal situation, the payer’s bank transfers the funds from the payer’s account to the payee.

when the payer’s bank or the payee’s bank refuses to honour this commitment. The reasons for this ‘decline’ may vary. In such a case, the cheque bounces and is called a ‘dishonoured of cheque’.

A cheque can be dishonoured for many reasons. It could be because the issuer of the cheque did not have a sufficient balance in the account or the signature on the cheque did not match exactly. At times, cheques are dishonoured if account numbers fail to match. Disfigured and damaged cheques may also be dishonoured by the bank.

A cheque may bounce if it has expired or if there is a problem with the date of issuing it. Sometimes, the issuer may choose to stop the payment. In that case, too, the cheque is considered dishonoured. There could be various other reasons for a bank to dishonour a cheque.

The main reason of Dishonoured

1. Insufficient Fund
2. Signature mismatch
3. Account number mismatch
4. Disfigured
5. Damaged
6. Expiry of cheque
7. Instruction to stop the payment
8. any other bank thinks appropriate or fit.

What are the consequences of a dishonoured cheque?

A dishonoured cheque attracts a penalty on the issuer of the cheque. It depends on the reason for the bounce.
If the cheque is dishonoured due to the insufficiency of fund, then it will be treated as a criminal offence under the Negotiable Instruments Act of 1881.

What is legal action can be taken against the dishonour of cheque?

According to Section 138 of the Act, the dishonour of a cheque is a criminal offence and is punishable by imprisonment up to two years or with the monetary penalty or with both. The holder of the cheque can file a complaint under Section 138 of Negotiable Instrument Act, 1881 against the drawer of the cheque and can also file a civil case for recovery.

What is the procedure for filing a complaint under Section 138 case against the drawer?

Three main conditions need to be fulfilled in order to invoke the provisions of Section 138 of N.I. Act..

1. The cheque should have been drawn by the drawer on an account maintained by him.
2. The cheque should have been returned or dishonoured because of insufficient funds in the drawer’s account.
3. The cheque is issued towards the discharge of a debt or legal liability.

If the above-mentioned condition is fulfilled the drawer of the cheque can file a criminal complaint under Section 138 of the Negotiable Instruments Act.

Procedure:

1. Notice to the Drawer: The payee needs to sent the notice to the drawer with 30 days from the date of receiving “Cheque Return Memo” from the bank.
   Notice includes:
   a. Cheque amount
   b. Mention the date (15 days) by which issuer of the cheque has to pay the cheque amount to the Payee from the date of receipt of the notice.

If the issuer of the cheques fails to make a fresh payment within 30 days of receiving the notice, the payee has the right to file a criminal complaint under Section 138 of the Negotiable Instruments Act. The complaint should be registered in a magistrate’s court of appropriate jurisdiction within a month of the expiry of the notice period.

Punishment & penalty for Cheque Bounce

On receiving the complaint, if the court is satisfied, send summon to the Payer and hear the matter. If found guilty,
The defaulter can be punished with the monetary penalty which may be twice the amount of the cheque or imprisonment for a term which may be extended to two years or both.

If the drawer makes payment of the cheque amount within 15 days from the date of receipt of the notice, it has been said that the drawer does not commit any offence.

Do I need to file a single complaint for the dishonour of several cheques?

A single Complaint can only be made with respect to three dishonoured cheques. For example, if there are six dishonoured cheques, 2 complaints need to have been filed.

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