Cheque Bounce Lawyer in Gurgaon

Cheque Bounce: Causes, Legal Implications & How to Avoid It

A cheque bounce, also known as a dishonored cheque, occurs when a bank refuses to process a cheque due to insufficient funds or other reasons. It can lead to legal action, financial penalties, and damage to one’s credit reputation. Let’s explore the causes, consequences, and preventive measures to avoid cheque bounces.

✅ What is a Cheque Bounce?

A cheque bounce occurs when a bank returns a cheque unpaid due to insufficient balance or other technical errors. The drawer (person issuing the cheque) is notified, and the payee (recipient) does not receive the payment.

⚠️ Common Causes of Cheque Bounce

1. Insufficient Funds:
   The most common reason for cheque bounce is insufficient funds in the issuer’s account.

2. Signature Mismatch:
   If the signature on the cheque does not match the signature recorded with the bank, the cheque will be rejected.

3. Date Errors:

   • Post-dated cheques presented before the due date.

   • Stale cheques presented after 3 months from the issue date.

4. Alteration in Cheque Details:
   Any overwriting, changes, or corrections on the cheque can lead to rejection.

5. Account Closure:
   If the account from which the cheque was issued is closed, the cheque will bounce.

6. Exceeding Overdraft Limit:
   If the cheque amount exceeds the overdraft limit, the bank may dishonor it.

7. Mismatch in Payee Name:
   Incorrect or misspelled name of the payee can result in cheque rejection.

⚖️ Legal Implications of Cheque Bounce in India

In India, cheque bounce is a criminal offense governed by Section 138 of the Negotiable Instruments Act, 1881.

1. Legal Notice:
   The payee must send a written notice to the drawer within 30 days from the date of cheque return, demanding payment.

2. Time to Make Payment:
   The drawer has 15 days from receiving the notice to make the payment.

3. Filing a Complaint:
   If payment is not made within 15 days, the payee can file a criminal complaint in court within 30 days.

4. Punishment for Cheque Bounce:

   • Imprisonment up to 2 years or

   • Fine up to twice the amount of the cheque, or both.

5. Civil Suit for Recovery:
   In addition to criminal action, the payee can also file a civil suit to recover the cheque amount and compensation for damages.

🛑 Consequences of Cheque Bounce

• Legal Action: Prosecution under Section 138 of the Negotiable Instruments Act.

• Financial Penalties: Banks may impose penalty charges for cheque bounce.

• Credit Score Impact: A bounced cheque can negatively affect the issuer’s credit score.

• Loss of Reputation: Repeated instances can harm the drawer’s reputation.

📝 How to Prevent Cheque Bounce?

1. Maintain Sufficient Balance:
   Ensure that your account has adequate funds before issuing a cheque.

2. Avoid Errors in Cheque Details:
   Double-check the amount, date, and payee name before issuing the cheque.

3. Use Digital Payments:
   Consider using online banking or digital payment methods to reduce errors.

4. Regularly Update Bank Information:
   Ensure that your signature, account details, and contact information with the bank are updated.

5. Stop Post-dated Cheques if Uncertain:
   Avoid issuing post-dated cheques if unsure about future funds.

📚 Remedies for Cheque Bounce Victims

1. Send Legal Notice:
   Issue a formal demand notice within 30 days.

2. File a Complaint:
   Approach the magistrate’s court if payment is not received.

3. Civil Recovery Suit:
   If the cheque amount is substantial, a civil suit can be filed for compensation.

📢 Important Court Judgments Related to Cheque Bounce

1. Dalmia Cement (Bharat) Ltd. vs. Galaxy Traders & Agencies Ltd. (2001):
   Held that a cheque bounce due to stop payment instruction is also covered under Section 138.

2. Krishna Janardhan Bhat vs. Dattatraya G. Hegde (2008):
   Clarified that the burden of proof rests on the accused to prove no liability.

🔎 FAQs on Cheque Bounce

👉 Q1. How long do I have to file a complaint after a cheque bounces?
A: You must file a complaint within 30 days after the 15-day notice period expires.

👉 Q2. Can I settle the matter out of court?
A: Yes, parties can opt for an out-of-court settlement at any stage.

👉 Q3. What are the charges for cheque bounce?
A: Bank charges typically range between ₹200-₹500 per bounced cheque, depending on the bank.

👉 Q4. Can a cheque bounce affect my CIBIL score?
A: Yes, repeated cheque bounces may affect your credit score, especially if linked to loan repayments.

⚡ Conclusion

Cheque bounce is a serious offense that can lead to legal complications and financial loss. Maintaining proper account management, verifying cheque details, and opting for digital payments can significantly reduce the risk of cheque bounce. If you encounter a cheque bounce, act promptly by sending a legal notice and pursuing legal remedies if necessary.