Cheque Bounce

A cheque bounce case, under Section 138 of the Negotiable Instruments Act, 1881, pertains to the dishonor of a cheque due to insufficient funds or other reasons. The law stipulates that if a cheque is returned unpaid, it constitutes an offense, provided certain conditions are met. The drawer (the person who issued the cheque) must have issued the cheque for discharging a legally enforceable debt or liability.

Upon dishonor, the payee (the person to whom the cheque was issued) must issue a written notice to the drawer within 30 days of receiving the cheque return memo from the bank. The drawer then has 15 days from receipt of this notice to make the payment. Failure to do so within this period results in a criminal offense, allowing the payee to file a complaint in court.

The penalty for cheque bounce may include imprisonment for up to two years or a fine, which can be twice the amount of the cheque or both. This legal framework aims to deter dishonoring cheques and ensures the enforcement of financial transactions.