Cheque Bounce

Full form: Dishonoured Cheque

Banking

A cheque bounce (dishonour) occurs when a bank refuses to pay a cheque due to insufficient funds, signature mismatch, account closure, or other reasons. In India, cheque bounce is a criminal offence under Section 138 of the Negotiable Instruments Act -- punishable with up to 2 years imprisonment or fine of twice the cheque amount.

In detail

Common reasons for cheque bounce:n1. Insufficient funds (most common)n2. Signature mismatchn3. Overwriting/corrections without counter-signaturen4. Stale cheque (presented after 3 months from date)n5. Account frozen or closedn6. Amount in words and figures mismatchnnProcedure after bounce: payee gets memo from bank, sends legal notice to drawer within 30 days, drawer has 15 days to make payment. If unpaid, file case in magistrate court within 30 days.

Formula

Cheque bounce charge: Rs 150-750 per instance charged by bank to account holder

Real-life example

🇮🇳 India example

Suresh issued a post-dated cheque of Rs 1.5L for flat EMI. On due date his account had Rs 87,000 -- bounce. Bank charges Rs 500. EMI lender sends legal notice. If Suresh doesn't pay Rs 1.5L within 15 days of notice, he faces criminal case under Section 138. He immediately transfers Rs 1.5L to avoid prosecution.

Frequently asked questions

What happens if someone gives me a bounced cheque? ▼

Send a written legal notice via speed post/registered post within 30 days of bounce. Give them 15 days to pay. If still unpaid, file complaint in magistrate court within 30 days after notice period. Courts are strict -- most defendants settle rather than risk 2-year imprisonment.