What to do after cheque got bounced? Cheque bounce case
A cheque bounce, also known as a dishonored cheque or a returned cheque, occurs when a bank refuses to honor a cheque. This usually happens due to insufficient funds in the issuer’s account, but there can be other reasons too. Here are some key aspects of cheque bounce. The primary reason for a cheque bounce is insufficient funds in the account from which it’s drawn. However, other reasons include signature mismatch, invalid cheque date overwriting on the cheque, or account closure. In many jurisdictions, issuing a bounced cheque can have serious legal implications. For instance, under Section 138 of the Negotiable Instruments Act in India, cheque bounce is considered a criminal offense and can lead to penalties or imprisonment. The exact legal implications depend on the country’s laws and the circumstances of the bounce. The bank usually sends a ‘cheque return memo’ to the payee, detailing the reason for non-payment.
The payee can contact the issuer for an alternate form of payment. If it was due to insufficient funds, the issuer needs to arrange funds and make the payment. If the issuer fails to make the payment, the payee may send a legal notice demanding payment within a certain period (typically 15 days). If the issuer still doesn’t make the payment, the payee can file a legal complaint under the appropriate laws (such as the Negotiable Instruments Act in India).
The bank may charge a penalty to the issuer for the bounced cheque. Frequent occurrences might lead to higher charges or even account closure. To avoid cheque bounces, ensure sufficient funds in your account before issuing a cheque, keep track of all cheques issued, regularly review bank statements, and consider using electronic payments to reduce the risk.
Repeated instances of cheque bounces can negatively impact your credit score, affecting your ability to obtain loans or credit in the future.
In many cases, especially where the bounce was due to a genuine mistake or oversight, the issue can be resolved through communication and negotiation between the payee and the issuer.
Cheque bounce cases often involve various legal aspects and interpretations under the law, particularly under the Negotiable Instruments Act in India.
Some cases and interpretations includes:-
Interim Compensation (Section 143-A) 2018 amendment introduced Section 143-A giving authority to court to grant interim compensation during the pendency of proceedings under Section 138. The drawer of the cheque has to pay interim compensation if they haven’t pleaded guilty under Section 138.
Burden of Proof: In cases under Section 138, merely denying the debt or liability isn’t sufficient to discharge the burden of proof. This was highlighted in Kishan Rao v. Shankargouda (2018)
Prevention To avoid future cheque bounces consider asking for electronic payments or maintaining a closer watch on your account balance and cheque transactions