There was a time when cheques were considered the most reliable form of payment. However, nowadays, due to the increase in cheque bounce cases, people fear accepting payments through cheques.

A cheque bounce typically occurs when a payee presents a cheque to the bank for payment, but the bank returns it, stating "insufficient funds." In such cases, the situation falls under a cheque bounce case. A cheque may bounce for various reasons, but if it is due to insufficient funds in the drawer's account, it constitutes an offense.

For a cheque bounce to be recognized, the bank must reject the cheque and issue a return memo indicating insufficient funds. In this situation, the cheque payee may send the drawer a cheque bounce notice, requesting payment of the outstanding amount.

A cheque is a negotiable instrument. When a cheque is not encashed after being duly presented to the bank, it is considered dishonored. Upon dishonor, the bank issues a return memo specifying the details of the cheque, including the date of presentation, dishonor date, cheque number, amount, and the reason for dishonoring the cheque.

Concerns regarding Cheque Bounce:

• Insufficient Funds: If there are not enough funds in the drawer's account to cover the cheque amount, the bank will reject the cheque and send it back to the payee with a note stating "insufficient funds" in the bank account.
• Expiration Validity of the Cheque: The cheque must be submitted for payment within three months of the drawer issuing it. If the cheque is not delivered to the bank within three months, it expires.
• Damaged Cheque: If a cheque is damaged or disfigured and the details are not properly visible or have stain marks, then the cheque will bounce.
• Signature Mismatch: If the signature of the drawer is not clear, is missing, or does not correspond with the one in the bank's record, the cheque will bounce.
• Other Technical Errors: Cheques may bounce due to technical errors, such as incorrect dates, incorrect account numbers, or any missing information.
   

Legal Frameworks Governing Cheque Bounce:

• Section 138 Negotiable Instruments Act, 1881: Deals with cheque bounce and describes the process for submitting a complaint and addresses the penalty for dishonoring a cheque.
  • Punishment: Cheque bounce is a punishable offence for which a fine can be imposed, which may extend to twice the cheque amount or imprisonment for a term not more than two years, or both.

Remedies:

• Resubmitting the Cheque: The payee may request the drawer to provide another cheque to correct the error if the cheque bounces because of any mismatched signature, a discrepancy between the words or digits of the cheque amount, or damage. The payee may also file a civil suit against the drawer to recover the amount owed if the drawer refuses to produce another cheque.
   
• Legal Notice: After the cheque gets dishonored, a legal notice should be sent through an Advocate within 30 days from the date of the cheque return memo. The notice should demand that the amount be returned within 15 days from the date of receipt of the notice.
   
• Complaint under Section 138 of the Negotiable Instruments Act: A cheque notice is issued under Section 138 of the Negotiable Instruments Act when a cheque bounces due to insufficient funds in the drawer's account to make the cheque amount payment.
   
• Civil Suit: In cheque bounce cases, mostly criminal complaints are filed. However, a "Suit for Recovery of Money" can be filed under Order VI of the Code of Civil Procedure, 1908. This can only be done when the limitation of issuing a notice or filing a criminal complaint is over.

Conclusion
Cheque bounce is a much more serious issue than it appears, with significant legal complications. It affects both parties—the drawer and the receiver. As mentioned above, remedies are available to the receiver in cases where a cheque bounces due to "insufficient funds" or other reasons. Consulting a legal advisor for such matters can help resolve legal issues and provide a pathway for compensation and recovery of the due amount.

OLQ Online Legal Query LLP is committed to making the legal process for cheque bounce cases more accessible and efficient across India. With a network of skilled legal practitioners throughout the country, we strive to ensure success and deliver justice through expert legal guidance. We also advise you on the optimal course of action.