About Cheque Bouncing

The consequence of a bounced cheque falls under Section 138 of the Negotiable Instruments Act, 1881. This offense carries penalties including a fine up to twice the amount of the bounced cheque or imprisonment for a term not exceeding two years, or both. When a payee presents a cheque to the bank for payment and it is returned unpaid due to insufficient funds, it is considered bounced. This can happen for various reasons, but if it occurs due to insufficient funds in the drawer's account, it constitutes an offense under the Act. The bank must reject the cheque and provide a memo stating the reason as insufficient funds. Subsequently, the payee can issue a cheque bounce notice to the drawer, demanding payment of the cheque amount.

Here are the circumstances that lead to a cheque bounce:

1. Insufficient account balance: When the drawer's account lacks sufficient funds to cover the cheque amount, the bank returns the cheque to the payee, citing insufficient funds.

2. Expired validity of cheque: Cheques must be presented for payment within three months of issuance. If presented after this period, the cheque expires and bounces.

3. Overwriting: Any alterations, including overwriting on the cheque such as changes to the signature or amount, lead to a bounced cheque.

4. Damaged cheque: If a cheque is damaged or illegible, making it difficult to read the details, it will bounce when presented for payment.

5. Signature mismatch: When the signature on the cheque does not match the signature on record with the bank or is unclear, the cheque is bounced.

6. Amount mismatch: If there is a discrepancy between the cheque amount written in words and figures, the cheque will be returned unpaid.