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Cheque Bounce

Cheque bounce has been a familiar financial offence - it can bring civil as well as criminal charges against you. An incident of cheque bounce shall fall under criminal or civil matter, which is a tricky question, that a lawyer can help you through.

Under what condition, a civil suit and a criminal suit are filed for cheque bounce?

Civil Suit: Usually, a civil suit when filed in the case of dishonour of cheque is for the recovery of the money, without dragging the defaulter towards punishment.

Criminal Suit:
If the drawer is found guilty as a wilful defaulter, he will be charged with a jail term of two years or a fine which is twice the cheque amount, or both. The defaulter is also given a chance to appeal to the sessions court within a month of the date of the judgment of the lower court.

What is the difference between Cheque Bounce and Cheque dishonour?

Cheque bounce and cheque dishonour are almost the same concepts.

The terms Cheque Bounce or Dishonoured Cheque are used when a bank denies honouring the cheque which was used for payment.

Cheque bounce means the cheque submitted to the bank to draw a certain sum of money mentioned on the cheque is rejected due to a distinctive signature.

Dishonouring of the cheque is the concept when a cheque is drawn by a person for an account which is maintained by a bank with the banker for paying a certain sum of money rejected by the bank due to an insufficient balance in the account or exceeds the amount there in the account

What are the penalty and punishments for cheque bounces?

When the bank returns the cheque unpaid it is considered a case of cheque bounce or cheque dishonour then that person can be shall be deemed to have committed an offence and that person may be asked to pay a fine which is extended to twice the amount mentioned on the cheque or can be punished with the imprisonment for a term which may be extended to two years or both.

The conditions shall unless:

  1. Within six months the cheque has to be presented to the bank from the date when the cheque was drawn or the validity period of the cheque whichever is earlier.
  2. In the due course of the cheque demands the payment of the amount mentioned on the cheque by providing written notice to the drawer of the cheque within thirty days of the receipt of the information concerning the return of the cheque as unpaid from the bank.
  3. The payee does not get the said amount due to the failure of the cheque by the drawer within fifteen days of the receipt of the said notice.

In August 2021, The Reserve Bank of India issued a notice related to new rules of cheque bounce. The customers who are involved in financial activities via cheque make sure that they have a minimum balance. Failure to maintain the minimum balance would lead to a situation of cheque bounce.

The new rule will be applied to all the private and national banks. The main aim to bring this rule was to faster clearing of cheques and to decrease the pendency of cheque clearance.

Grounds for Cheque Bounce:

  1. Insufficient account balance

    If the minimum account balance is not maintained in that case the cheque may bounce.
     
  2. Expired validity

    The cheque must be submitted before the expiry date, in case it is submitted after the expiry date it may bounce.
     
  3. Overwriting

    If the amount written or any details written are overwritten in that case also the cheque may bounce.
     
  4. Damaged cheque

    In case the cheque is damaged or disfigured due to some reason then the cheque may bounce.
     
  5. Mismatching of signature
    In case the signatures are mismatched the cheque may get bounced due to such a reason.
     
  6. Mismatch of Amount or digits

    When the amount mentioned on the cheque does not match it might result in a cheque bounce.
     
  7. The wrong date mentioned

    The cheque can also bounce in case the wrong date is mentioned on the cheque.

Remedies in case the cheque bounces:

When there is a case of cheque bounce because of reasons like insufficient balance, overwriting, mismatching signature or damaged cheque etc. the drawer of the cheque can submit another cheque by rectifying the mistakes to avoid any civil action against the drawer.

Negative Impact:

  1. In case there is an act of recurring cheque bounce it can lead to affect the financial credit history.
  2. According to the new rules of the Reserve Bank of India, a bank can restrict the issuance of cheques book to the costumes in case of a repeated cheque bounce issue

Ways to avoid the dishonour of cheque:

  1. Use a signature which is similar to the signature registered with the bank
  2. Make sure there is a minimum balance maintained
  3. Filing the details on the cheque correctly so that the cheque does not bounce

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