Cheque Bounce : Bank Charges, Penalities & Procedure for filing case

Updated on July 08, 2024 07:59:28 AM

Cheque bounce happens when the bank refuses to issue the amount mentioned in the cheque by the payer(account holder). The bank provides a memo with the reasons for declining the cheque. The first step is to send this memo to the person who had provided you with the cheque and ask him to pay the amount to you. If the payee refuses then you need to go further which will be explained here.

Cheque bounce simply means the cheque issued to the payee, but the amount could not be withdrawn through the cheque due to some reasons. All those particular reasons will be discussed later. If you have a bit of confusion about the cheque, let us clear it for you.

A cheque is a document that orders a bank to pay a specific amount of money from a person's account to the person in whose name the cheque has been issued. The person writing the cheque, known as the drawer, has a transaction banking account in the bank where their money is held.

A bank can refuse to make payments for the cheque due to inconsistency in the amount, bad condition of cheque, and many more. Let’s discuss the possible reasons when a cheque bounces in detail.

The possible reasons for cheque bounce could be as follows:

Sometimes if the amount is very large and the bank does not have that amount at that time then they can also dishonour the cheque.

In case when your cheque bounces then you have to file a case for cheque bounce

1. Step1) Demand Notice- After a cheque is bounced, a notice needs to be served to the opposite party within 30 days from the date of the cheque memo.
   The amount needs to be claimed for which the cheque has been bounced, providing him 15 days to settle the matter.
2. Step2) 15 Days Settlement Period- The opposite party has 15 days time from receipt of the notice to settle the said matter. No cause of action shall arise till the expiry of the given 15 days or if the party pays within this specified period.
3. Step3) Case Filing- After completion of 15 days, if the opposite party does not settle the matter or ignores the notice, then the holder of the cheque may file a criminal complaint before the appropriate court within 30 days of the expiry of said 15 days. If 30 days period lapses & the holder hasn’t filed the case, then the delay can be ignored by the court on discretion and if sufficient cause being shown by the holder of the cheque.

[Note: You can also file for a civil suit for recovery of the cheque amount, along with the cost borne and the lost interest.]

Documents needed in support

1. Copy of the sent legal notice to the issuer of the cheque.
2. Original Cheque which was bounced/rejected by the bank.
3. Cheque return memo.
4. Proof of service to sending a legal notice to the issuer(Courier receipt).

Penalties taken by different banks are not the same for cheque bounces. Cheque bounce charges in SBI may vary with the charges with HDFC bank for Cheque bounce. You can have a look at the table to understand it in a better way.

The Negotiable Instruments Act,1881 applies to the cases related to cheque bounces in India. According to this law, cheque bounces(giving a bounced cheque to someone) is a punishable offence and can cause imprisonment for two years, penalty, or both in some cases.

The provision states that someone who commits an offence under Section 138 faces a sentence of up to two years in prison or a fine of up to twice the value of the check, or both. In the event of a default due to check dishonour, the section is one of the most often invoked clauses by a lender.