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Cheque Bounce Notice - Procedure, Punishment And Penalty

  • Writer: Lead India
    Lead India
  • Aug 4, 2023
  • 3 min read

Although cheques are frequently used as payment methods, they may fail for a variety of reasons, including insufficient money, erroneous signatures, or an out-dated cheque. The issuer of a cheque may face substantial legal repercussions if the bank refuses to honour it. The idea of a "Cheque Bounce Notice" is used to deal with such instances.

Preventing Cheque Bounce and Its Effects

When the bank declines to honour a check because of inadequate funds or any other irregularities, it is called to bounce. The beneficiary of a dishonoured cheque has the legal right to sue the issuer in order to recoup the cheque's declared value. Prior to filing a lawsuit, the beneficiary must provide the issuer a Cheque Bounce Notice, providing them a chance to fix the problem within a given time frame.



Giving a Cheque Bounce Notice: Procedure

  • Validate the Cheque- Make sure the cheque has indeed bounced before mailing the notice. You can confirm this by looking at your bank statement or getting in touch with your bank.

  • Gather Information- Compile all the information you can about the cheque, including the cheque number, the date, the amount, and the justification the bank gave for not honouring the cheque.

  • Prepare the Notice- The notice for Cheque Bounce needs to be written in the proper legal format on stamp paper. It should contain information such as the beneficiary's name and address, the issuer's name and address, the specifics of the cheque, the justification for the dishonour, and the request for payment.

  • Deliver the Notice- The notice must be delivered to the issuer by means of registered mail or courier with a return receipt requested. This demonstrates that the notice was actually handed to the issuer.

  • Waiting Period- From the time the notice is received, the issuer normally has 15 days to settle the amount to be paid. They have this time to make arrangements for payment or iron out any issues that arise.

  • Legal Action- When the issuer fails to make the repayment by the deadline, the beneficiary may file a lawsuit.

Cheque Bounce: Punishment and Penalty

The Negotiable Instruments Act of 1881 governs situations of cheque bounce in India. The Act specifies both a penalty and a punishment for the cheque's issuer. The punishment tries to give the harmed party a solution rather than serving as a criminal consequence.

  • Criminal Penalty- If a cheque bounces because there isn't enough money or the signatures don't match, the issuer could be held criminally responsible. In the proper court, the harmed person may bring a criminal charge against the issuer.

  • Imprisonment- At the judge's discretion, the issuer may receive a sentence of up to two years in prison, a monetary penalty, or a combination of the two. Before deciding on a sentence, the court will take into account the situation and its nature.

  • Compensation- In addition to being subject to legal sanctions, the issuer must compensate the beneficiary. Typically, the reimbursement is worth twice the value of the returned cheque.

  • Civil Liability- The beneficiary may also file a civil lawsuit in order to recover the full amount of the returned cheque, as well as any extra losses or court fees.

Compromise and Settlement

Before the legal process is finished, the parties concerned may in some circumstances decide to settle the dispute peacefully. In order to avoid protracted legal processes, this might be accomplished by a compromise in which both parties accept a specific sum or settlement amount.

The first step in taking legal proceedings against the person who issued a bad cheque is to send them a Cheque Bounce Notice. The impacted party can safeguard their rights and get the money they're owed by following the necessary steps and giving the issuer a chance to make things right.

To avoid potential fines and guarantee the smooth operation of financial transactions, it is imperative that both issuer and beneficiaries are informed of the legal ramifications of situations involving bounced cheques. Getting legal counsel and acting quickly can help handle the situation effectively and efficiently in the event that a cheque bounces.

You will need the help of lawyers to draft a Legal notice for cheque bounce. In cases involving Cheque Bounce Notices, lawyers are essential because they help with the notice's creation and delivery, provide legal counsel regarding available options, and, if necessary, represent clients in court.

One can talk to a lawyer through Lead India for any type of legal advice. In India, free legal advice online is accessible at Lead India. Along with obtaining free legal advice online, you can also ask questions to experts online free at Lead India.


Call Us: +91–8800788535

Email: care@leadindia.law


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