A cheque bounce, also known as a dishonored cheque, occurs when a bank refuses to honor a cheque due to insufficient funds or other issues.

Reasons for Cheque Bounce:

  1. Insufficient funds
  2. Signature mismatch
  3. Cheque expiration
  4. Stop payment instructions
  5. Frozen account

Legal Implications:

  1. Negotiable Instruments Act, 1881 (Section 138)
  2. Penal provisions (fine and imprisonment)
  3. Civil liability (damages and compensation)

Procedure to Handle Cheque Bounce:

Step 1: Notice

  1. Sender sends a demand notice to the drawer within 30 days of bounce.
  2. Notice should include cheque details, amount, and reason for bounce.

Step 2: Complaint Filing

  1. If payment not made within 15 days of notice, file a complaint.
  2. File within 30 days of notice period expiration.

Step 3: Court Proceedings

  1. Court summons issued to the drawer.
  2. Drawer’s response and evidence submission.
  3. Judgment and potential penalties.

Penalties:

  1. Fine (up to ₹2 lakhs)
  2. Imprisonment (up to 2 years)
  3. Compensation (damages and interest)

Prevention Measures:

  1. Verify account balance before issuing cheques.
  2. Ensure accurate signature and details.
  3. Monitor account transactions regularly.

Cheque Bounce FAQ:

  1. What is the time limit for filing a complaint?
  2. Can I file a complaint online?
  3. What are the consequences of cheque bounce?

Resources:

  1. Reserve Bank of India (RBI) Guidelines
  2. Negotiable Instruments Act, 1881
  3. Indian Penal Code (IPC)
  4. Legal advice from experts