What Can you do in Case of Cheque Bounce?
Feb 24, 2020 Legal Guidance
One of the most common financial offences is the cheque bounce. The cheque can bounce due to signature mismatch, overwriting or insufficient funds in the account. A cheque bounce can lead the issuer in legal trouble. In our country, many cases are pending due to the case of cheque bounce.
Repeat offence of the cheque bounce can have serious repercussion. The issuer can be asked to pay the penalty for the cheque bounce along with the cheque payment or even get jail time. In severe case, the bank may cancel your cheque book and even close your bank account. However, the RBI states that the adverse actions can only be taken if the value of the cheque is more than Rs 1 crore and the cheque has already bounced more than four times.
We discuss in detail about the dishonour of cheques and legal course in such cases:
Repeat offence of the cheque bounce can have serious repercussion. The issuer can be asked to pay the penalty for the cheque bounce along with the cheque payment or even get jail time. In severe case, the bank may cancel your cheque book and even close your bank account. However, the RBI states that the adverse actions can only be taken if the value of the cheque is more than Rs 1 crore and the cheque has already bounced more than four times.
We discuss in detail about the dishonour of cheques and legal course in such cases:
- Penalty imposed by the bank: In case the cheque is bounce, both the defaulter and the payee are charged by their banks. If the bounced cheque is for the loan payment, then you will have to bear the late payment charges along with the penalty fee charged by the bank. Some customers make the use of overdraft account wherein the banks will cover the cheques that will otherwise bounce. The customer will then pay the interest on the overdraft amount.
- Impact on credit score: When applying for a home loan, make sure there is enough money in your account. If the cheque for processing fees gets bounced then it might lead to rejection of the approved loan amount. To make sure this does not happen, it is important to always maintain a minimum balance in your account. Every cheque bounce reflects in your credit history and recurring cheque bounces can impact your credit score negatively.
- Criminal charges: Cheque bounce is a criminal offence and the payee- the person or the bank- can file a criminal complaint under Section 138 of the Negotiable Instruments Act. If it is the first time the cheque has bounced then the bank immediately issues a ‘Cheque Return Memo’ citing the reason for the non- payment. The holder is then given three months to resubmit the cheque to the bank within three months of the date mentioned on it. The aggrieved person can legally prosecute the defaulter by sending a legal notice within 30 days of receiving the return memo. It is important to mention all the aspects of the case like nature of transaction, amount, date of cheque deposit and when it was disapproved by the bank. If the cheque drawer or the issuer fails to make the payment within 30 days, then the cheque holder is free to file a criminal case against the issuer.
- Civil suit: A separate suit is filed for recovery of money including the cost and the interest lost, is filed in the cheque bounce case as filing criminal charges does not help in recovering the amount. The aggrieved party may file a cheating case under Section 420 of the Indian Penal Code. Under the notified Negotiable Instruments (Amendment) Act, the complainant can file a complaint the city where he is based or where the cheque is deposited.
Things to remember
Remedies are possible only of the pending debt or liability can be established. The holder cannot sue the issuer if the cheque was given as a gift or donation.
It is a good practice to keep a track of amount in your account to make sure no such instances happen to you. If you find out that your account does not have enough money to pay the cheque, then you can inform the holder or ask the bank to cancel or stop the payment from your account till enough funds are accumulated in your account.
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