A cheque bounce occurs when a bank rejects a cheque presented for payment due to insufficient funds, a mismatch in signatures, or other technical or legal reasons. Here’s what typically happens in cheque bounce cases:
1. Notification of the Bounce
When a cheque bounces, the payee (the person or entity presenting the cheque) receives a return memo from their bank explaining the reason for the dishonor.
The drawer (the person who issued the cheque) may also be notified by their bank.
2. Legal Implications
Cheque bounce is a criminal offense in many jurisdictions. Under Section 138 of the Negotiable Instruments Act, 1881 in India, the following legal procedures apply:
A. Sending a Legal Notice
The payee must send a legal notice to the drawer within 30 days of receiving the cheque bounce memo.
The notice should demand the payment of the cheque amount within 15 days of receipt by the drawer.
B. Filing a Complaint
If the drawer fails to pay within the stipulated 15 days, the payee can file a criminal complaint in court within 30 days.
The case is generally heard in a magistrate’s court.
3. Court Proceedings
Summons Issued: The court issues a summons to the drawer.
Hearing: Both parties present evidence and arguments. The cheque, return memo, legal notice, and acknowledgment of the notice are key pieces of evidence.
Verdict: If found guilty, the court may impose:
A fine (up to twice the cheque amount).
Imprisonment (up to two years in India, depending on the severity).
4. Civil Remedies
In addition to criminal proceedings, the payee may also file a civil suit for recovery of the cheque amount.
5. Settlement
Many cheque bounce cases are resolved out of court through mutual settlement.
If the drawer makes the payment during or before the proceedings, the case may be withdrawn.
Key Precautions to Avoid Cheque Bounces:
Ensure sufficient funds in the account.
Maintain consistency in signatures.
Avoid issuing post-dated or expired cheques.
Double-check details like the payee’s name and amount.
If you’re dealing with a cheque bounce case, consulting a lawyer is highly advisable to ensure compliance with legal procedures.