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Shalini Singh

Shalini Singh | Updated: Aug 17, 2019 | Category: Cheque Bounce, Legal

The Penalty Under Cheque Bounce – It’s Provisions And The Conditions For Filing It.

Cheques are the most common, easy, and safe way to conduct financial transactions such as repayment of the loan, payment of salary, bills, fees, etc.  In the case of cheque payment, the person who has the bank account and draws or writes the Cheque is the Drawer and his bank is called Drawee while the person to whom the money is made payable is called Payee. Cheque Bounce in India is one of the most common cognizable offences in India under section 138 of the Negotiable Instruments Act, 1881. Every day the banks in India process a majority of cheques. However the penalty under Cheque bounce is way harsh.

Reasons for the Cheque Dishonour in India

  • Insufficient Funds in the Bank Account.
  • Signature Mismatch
  • Expired  and Damaged Cheque
  • Overwriting of the date mentioned in the Cheque.
  • The difference in the amount written in words and numerical.
  • Account Number mismatch.
  • Suspicion of the fraud by the bank
  • Account closure.
  • Death of the customer.
  • Doubt in the authenticity of the Cheque

Effects of Cheque Bounce on customer

In case the Cheque is dishonored or bounced, it can land the customer into the legal trouble. The accused may be fined with a huge bounced cheque penalty fee or even a prison term. Other than these, it can affect the financial image of the individual.

The Negative Effect on the Credit Score

If an individual availing a home loan has an insufficient amount in their account, then the processed Cheque will get bounced, and the bank might reject the sanctioned loan immediately. Repeated cheque bounces can affect the financial credit history of an individual, making it difficult to avail loans in the future.

Restricted from traveling abroad

One cannot travel abroad in case the Cheque is dishonored or bounced.  Since it is a criminal offense, one can travel only after taking permission from the Court. Also, if one does not attend the Court continuously for a long period, the Court can issue an arrest warrant even.

The Penalty Under the Cheque Bounce

In today’s financial world, thousands of cheque bouncing cases come into the scene, but many remain pending in the Court. One can file a criminal complaint under section 138 of the Negotiable Instruments Act.

  • In case a person is found guilty of dishonoring or bouncing off the Cheque, then he/she is liable to a punishment of a maximum of 2 years of imprisonment.
  • Also, a fine which may extend to twice the amount mentioned in the Cheque or both.
  • The bank also has the right to stop the cheque book facility and close the account for repetitive cheque bounce offenses.

In case if more than one cheque is bounced, the Payee can file separate cases against each of the dishonored Cheque raising further issued for the defaulter. However, if the defaulter understands that it is a kind of genuine mistake like overwriting of the date, then that can be overcome by paying a small fine to the bank for the bounced Cheque.

Conditions for Initiating The Prosecution

  • The Cheque is to be presented to the bank within three months of issue or within its validity, whichever is earlier. Earlier the validity was six months, which has been reduced to three months.
  • The Cheque must be drawn by the Drawee and bounced.
  • The Payee needs to send a registered notice for the further payment after the Cheque was bounced.
  • If the Payee fails to pay within 30 days from the receipt of the notice.
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Who can file the case of Cheque Bounce?

It’s obvious that the Payee of Cheque will case a file if his/her Cheque is bounced. But in certain conditions, the cases can be undertaken through a power of attorney. The complaint will appear before the Magistrate, and the Magistrate will further examine it.

In case, if there is a delay in filing the complaint, the complaint needs to give a proper reason for it and then the Court will file the case.

Procedure for filing the case

  • A demand notice should be sent to the payor within 30 days of receiving the cheque return memo.
  • After receiving the notice period, the payor needs to make payment within 15 days.
  • In case thereafter, if the Drawer fails to make the payment, the Payee can lodge a complaint.
  • After receiving the complaint, the lawyer will issue the process from, and the accused will be requested for his/her presence in the Court.
  • Under section 138, further proceedings will be initiated in the Court.

Required Documents for filing the Cheque Bounce Case

  • Original Bounced Cheque
  • Bank return memo stating the dishonoring of the Cheque.
  • Copy of receipts
  • Complaint itself
  • Affidavit

Case Duration

The amount of pending cases in our country gives us an image of how efficient is our constitutional law. It usually takes one and a half years for the case to get closed if the individual attends every hearing and provides sufficient evidence. But if the individual is inconsistent and leaves the city without attending any hearing, the duration may take three to five years or may remain in the pending status.

Conclusion

Cheque Bounce is a serious criminal offense that can leave you with imprisonment of 2 years and even a fine twice the amount mentioned in the Cheque. It is a wise way to keep track of the available balance in the account or maintain extra cash in the account to maintain a good impression in the eye of the bank and to avoid the penalty under cheque bounce.

For any assistance regarding cheque bounce case, reach us at LawyerINC

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Shalini Singh

Shalini Singh

Shalini is working as a legal research and content writer from the past 2 years with experience in covering Legal Act and Amendment related topics.


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