What Should You Do if Your Cheque Bounces

Last Updated at: Nov 23, 2020
In June 2020, the Finance Ministry announced decriminalisation of 39 minor economic offences, as a part of the COVID-19 relief measures. Among others, such offences included dishonouring/bouncing of cheques under Section 138 of the NI Act, 1881. This section earlier levied criminal liability, punishable with imprisonment up to 2 years and/or a fine up to twice the cheque amount.


While PayTM and Mobikwik May have transformed our digital payment habits, the cheque still remains the most widely accepted form of payment for businesses as well as personal use. Because of the lack of immediacy in payment vide a cheque, encasing a cheque through your own bank account has its own set of problems. If you’re worried about what recourse to take when your cheque bounces, read on.

  1. Know that cheque bouncing is a criminal offence

The bouncing of cheque is criminalised by the provisions of the Negotiable Instruments Act. This act not only provides a legal validity to cheques and their various dynamics including provisions about stale cheque and crossing (remember the two lines we religiously cross at the edge?) but also prescribes punishment for cheque dishonour – imprisonment of two years and fine.

  1. Read the bank notice carefully

After a cheque is dishonoured, the bank is legally bound to send you a notice stating the reason for such dishonour. The reasons may be attributed to the fault of either party, but is more often than not, due to insufficient balance in the bank account of the person handing you the cheque. Other reasons, which may pass off as genuine mistakes could be: A signature mismatch, presenting a post-dated cheque or a stale cheque (that is, more than 90 days after the expiry of the cheque).

  1. Preparing to send a notice

To err is human, right? The Act provides that the receiver of the cheque, called payee must notify the maker of the cheque, called drawer immediately, that is without delay within 30 days of receiving information from the bank about dishonour. The onus is now on the drawer to pay your money within 15 days of the receipt of the notice, post which you are legally entitled to file a criminal complaint.

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 4. Filing a case: The final resort

With this 45 day timeline and the sword of a possible prosecution drawing closer, most people usually pay the amount through cheque or use any of the other mediums like cash, digital wallets or electronic transfer to immediately fulfil their legal obligation. However, if your drawer has still not paid, then it’s time to prepare for a legal battle.

A case needs to be filed within 30 days of the expiry of 15 days notice period (the time given to drawer to repay, after receipt of notice from you). It is advisable to consult a lawyer at this point of time, as there are evidenced and legal formalities that need to be taken care of. An example of these conditions are mentioned in Section 138 of the Act, which state that a case may be filed only for reasons of insufficiency in funds (as the act assumes that all other reasons may be trivial and can be corrected with issuing a fresh cheque) and that it should’ve been drawn for a debt you’re entitled to.

Let’s say you’re an egg vendor who delivered eggs every day for a few weeks on the basis of a request made to you over the phone. This may become a tricky part, as the drawers often plead in the court that they owed nothing to you, and proving it may be a challenge in the absence of adequate records. It is your advocate who will work with you on establishing that you had a right to receive payment for your goods/services despite the absence of a formal contract.

  1. The Verdict

If the Court finds the person guilty, a fine up to twice the amount of cheque involved alongside a punishment of two years may be invoked. The Court also has the power to attach personal assets of the offender to ensure complete payment of the amount due to you. Additionally, the Court May order or banks may suo moto cancel the cheque facility for the offender.

Cheque Bounce Case

Avani Mishra is a graduate in law from the National Law Institute University, Bhopal. She qualified the Company Secretary course with an All India Rank 1 and is a recipient of the President’s Gold Medal for her academic distinctions. She also holds a B.Com degree with a specialization in Corporate Affairs and Administration.