A cheque bounce can result in civil and criminal consequences in India, particularly when the cheque is dishonoured due to insufficient funds or if it exceeds the arrangement with the bank. Such cases are primarily governed by the Negotiable Instruments Act, 1881.
Key points:
Grounds for prosecution: If a cheque is dishonoured and the legal requirements are fulfilled—such as issuing a statutory legal notice and failure to make payment within the prescribed time—the payee may file a cheque bounce case.
Punishment: If found guilty, the drawer of the cheque may face:
Imprisonment for up to two years, or
A fine that may extend to twice the amount of the cheque, or
Both imprisonment and fine.
Legal notice: Before filing a criminal complaint, the payee must generally send a legal demand notice to the drawer within the prescribed time after receiving the cheque return memo from the bank.
Opportunity to pay: If the drawer pays the cheque amount within the legally prescribed period after receiving the notice, criminal proceedings can usually be avoided.
