Bouncing Of Cheque

• A cheque bounce is an offence under Section 138 of the Negotiable

Instruments Act, 1881, punishable with a fine which can extend to
twice the amount of the cheque or imprisonment for a term not more
than two years or both. When the payee presents a cheque to the
bank for payment, and the cheque is returned unpaid by the bank
with a memo of insufficient funds, then the cheque is said to have
bounced.
• A cheque bounce can occur due to several reasons, but if a cheque
bounces due to insufficient funds in the drawer’s account, it amounts
to an offence under the Act.
Notification of RBI

• Provide the cheque to the bank within three months of its issue or
within the period of its validity. (The validity of cheque were
considered to be six months previously; however, Reserve Bank of
India vide
 Notification No. RBI/2011-12/251DBOD.AML BC.No.47/14.01.001/20
11-12
 directed that the validity period of cheque to be reduced from six
months to three months with effect from 1st April, 2012.).
The various situations that result in cheque bounce are as follows:

• Insufficient account balance

• Overwriting
• Damaged cheque
• Signature mismatch
First Step(Issuance of Cheque Bounce Notice

• When the cheque bounces due to an insufficient amount, the first

step is to demand the payment of the amount by issuing a cheque
bounce notice in writing by post under the Negotiable Instruments
Act.
• The payee can issue a cheque bounce notice within 30 days of an
intimation sent by the bank along with the bounced cheque stating
that the bank cannot make the cheque payment due to an insufficient
amount. 
Second Step
• After issuance of the cheque bounce notice, the payee must give the
drawer 15 days time period from the receipt of the cheque bounce
notice to pay the cheque amount.
Third Step
• After the expiry of 15 days of issuing the cheque bounce notice, the
payee can initiate legal action against the drawer. The payee should
register a complaint under Section 138 of the Act. Under Section 138 of
the Act, the offence of cheque bounce is a criminal offence for which
the payee can initiate a criminal suit. The payee must file the complaint
against cheque bounce before the Magistrate within 30 days of the
expiry of 15 days of the issuance of the cheque bounce notice.
• However, a cheque bounce notice cannot be issued if the cheque was
issued as a donation, gift or any other obligation that is not legally
enforceable. The cheque must be issued for the discharge of a legally
enforceable liability or debt to constitute an offence under the Act.
Jurisdiction of Magistrate for Filing Cheque Bounce Suit

• The court within whose jurisdiction the branch of the bank where the
payee maintains the account is situated, will have jurisdiction to try
the offence
Process of Cheque Bounce Suit

• Filing a complaint before the Magistrate after the expiry of 15 days of

receipt of cheque bounce notice by the drawer.
• The payee/complainant has to appear before the court and provide
the details of the case. If the Magistrate is satisfied with the
complainant’s statement, he will issue summons to the drawer for
appearing before the court.
• The drawer will appear and accept or deny the facts stated by the
complainant. If the drawer denies the complaint, then the court will
proceed with the criminal trial of the case.
• The drawer/accused will file his statement, evidence and arguments
of both sides will be presented to the court.
• If the court finds the drawer guilty of the offence of cheque bounce,
the court will pass a judgement of conviction against the drawer for
the offence of cheque bounce.
• The punishment for cheque bounce is imprisonment for a term not
more than two years or a fine that can extend to twice the amount of
the cheque or both.