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    Quick Summary

    A cheque bounce occurs when a bank refuses to honour a cheque due to insufficient funds, a signature mismatch, bank account-related issues or other valid reasons. In the case of a cheque bounce, there might be bank charges and legal action under the Negotiable Instruments Act, 1881, depending on why the bounce occurred.

    Let's understand the bounce cheque meaning and its different aspects.

    When does a cheque bounce become a legal case?

    A case of a cheque bounce can become a legal matter if the cheque is presented within its validity period (currently three months from the date of issue) and the conditions under the Negotiable Instruments Act, 1881, are met.

    If the cheque is dishonoured, the bank will return the cheque unpaid with a return memo. The payee must issue a legal notice within 30 days of the cheque being dishonoured. If the issuer fails to pay within 15 days of receiving the notice, a cheque bounce case can be filed and legal procedures can be taken.

    Let's understand the situation with a simple example.

    Rahul's ₹50,000 cheque from Amit bounces because of insufficient funds. Rahul sends a legal notice within 30 days of receiving the return memo. If Amit fails to pay within 15 days of receiving the legal notice, Rahul can file a cheque bounce case.

    • funds: There is insufficient balance available in the account to pay the cheque amount.
    • Invalid/incorrect date: The cheque is either more than 3 months old or bears an incorrect/unidentifiable date.
    • Invalid signature: The signature of the issuer doesn't match according to the bank’s records.
    • Difference between amounts: The numbers in words and digits are different from each other.
    • Invalid/disfigured cheque: The cheque is damaged/torn or stained and cannot be processed.
    • Unauthorised corrections: Overwriting or scribbling done on the cheque without proper authentication.
    • Closed/frozen account: The cheque is drawn against an account that is either closed or frozen.
    • Forgery: The bank suspects the signature on the cheque has been forged.

    Charges for a bounced cheque

    A cheque bounce charge usually includes a penalty imposed by the bank only when the customer is at fault, i.e., in cases such as insufficient funds or a signature mismatch. The charges for a bounced cheque vary depending on the bank's policies, the reason for dishonour, and whether the cheque was issued or deposited, with both the issuer and payee potentially incurring fees. 

    Punishment/penalty on cheque bounce under Section 138 of the Negotiable Instruments Act

    If the drawer fails to make payment within 15 days of receiving the legal notice, they may face a penalty for cheque bounce under Section 138 of the Negotiable Instruments Act, 1881. The cheque dishonour penalty can include imprisonment of up to 2 years, a fine of up to twice the cheque amount, or both.

    While there is no fixed format for replying to a cheque bounce notice, the response should generally include:

    • The drawer's name, address, and other relevant details.
    • Details of the cheque, including the issue date and cheque return memo.
    • A clear response to the allegations made in the notice.
    • Any valid defence or explanation that supports the drawer's position.
    • Details of any grievance or claim against the payee, if applicable.
    • A summary of the legal defence against the cheque bounce allegations is required.
    • The reply may be sent directly or be drafted and sent through a lawyer on their official letterhead, depending on the circumstances.

    You can avoid a cheque bounce by taking the following steps:

    • Maintaining an adequate account balance
    • Ensuring all cheque details are accurate
    • Matching signature
    • Avoiding overwriting on the cheque

    By following these simple steps, you can issue a cheque that is honoured, prevent penalties, legal notices, and unnecessary disputes. 

    Understanding cheque bounce rules can help you avoid financial and legal complications. Whether you have a savings account or a current account, following proper banking practices will help ensure hassle-free cheque transactions. For seamless banking transactions, explore Axis Bank Savings Account and enjoy hassle-free banking.

    Frequently Asked Questions

    1. Can a cheque bounce case be settled?

    Yes. The parties can settle the case of a cheque bounce at any stage before the court delivers its final judgement.

    2. What is the time limit for filing a cheque bounce case?

    After the drawer fails to make payment within 15 days of receiving the legal notice, the payee must generally file the complaint within one month from the date the cause of action arises.

    3. Is a cheque bounce offence bailable?

    Yes. A cheque bounce offence under Section 138 of the Negotiable Instruments Act, 1881, is a bailable offence.

    4. Can a company be held liable in a cheque bounce case?

    Yes. If a company issues the cheque, it and its responsible directors or officers may be held liable.

    5. Can a cheque bounce case be filed for a post-dated cheque?

    If the post-dated cheque is not honoured on the specified date, a cheque bounce case can be filed.

    6. Can both civil and criminal action be taken for a bounced cheque?

    Yes. The payee may initiate criminal proceedings under the Negotiable Instruments Act, 1881, and also pursue civil remedies to recover the amount.

    Disclaimer: This article is intended solely for informational purposes. The views expressed in this article are personal. Axis Bank and/or the author shall not be liable for any direct or indirect loss or liability incurred by the reader arising from reliance on the content herein. Readers are advised to consult a qualified financial advisor before making any financial decisions. Axis Bank does not endorse or guarantee the accuracy of any third-party content or links included in this article.

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