Most people and businesses use cheques as method of payments for goods and services in their day to day lives. However, one gets confused between “cheque bounce” and “dishonour of cheque” thinking that they are two different things. They are both literally used to mean a situation where a cheque, which has been issued, is not paid, although their semantic values are different. This blog will explain the difference and legalities involved in bounces, penalties, along with how places like Law Chef can help in cheque bounce cases.
Under Negotiable Instruments Act, Section 138 has provided cheque bounce It prescribes a legal procedure if a cheque is returned unpaid for want of funds or for any other reason. The cheque bounce penalty depends on the following sanctions; penalty of 100 percent fine of the amount stated in the cheque, two year imprisonment or both. For the purpose of cheque bounce law, the payee needs to send a legal notice to the issuer within 30 days from the date when cheque was returned. Non-compliance with the provisions of the notice results to the application of the cheque bounce penalty through the court case. Understanding of the cheque bounce law and its consequences as cheque bounce penalty is crucial in order to avoid troubles connected with money and law.
What Is a Cheque Bounce?
Cheque bounce means a situation in which the bank does not honour a cheque because there is insufficient balance in the drawer’s account or any other reason. When a cheque bounces, an intended payment fails to be made to the payee, and this has definite financial and legal repercussions for the issuer.
Common Reasons for Cheque Bounce:
- Lack of adequate balance in the bank account
- Mismatch of signature
- Erasing or the placing of additional writes or texts on the cheque
- Early presentation of a post-dated cheque
- Account closure or freezing
What Is Dishonour of Cheque?
Cheque bounce is a term which includes all situations that can prevent cheque from being met by the bank. It encompasses cheque bounce but may also embrace technicalities such as; it was not authorized, it is technical, and there is wrong format of cheque. In other words, cheque bounce can in fact be considered as a component part of dishonour of cheque majoring on insufficient funds or account related causes.
Legal Implications of Cheque Bounce
Cheque bounce is defined under Section 138 of the Negotiable Instruments Act, 1881. This law entitles the payee to recover an amount from the payer for the amount that is due.
Steps to Take in a Cheque Bounce Case:
- Cheque Bounce Legal Notice: The first point of action is to issue a legal notice to the issuer to initiate the mode of recovery within 30 days of receiving the cheque return memo from the bank.
- Response Period: The issuer has 15 days after receipt of the notice to make the payment.
- Filing a Case: If the issuer does not meet these requirements, the payee may move to criminal court within 30 days after the 15 days have elapsed.
There are various platforms today that can help you create a strong cheque bounce legal notice such as Law Chef and may help you throughout the process.
Penalties for Cheque Bounce
- The cheque bounce penalty can be severe and include:
- Cheque bounce Penalty does not exceed twice the amount of the cheque
- Prison term to a maximum of two years
- A compensation of the amount to the payee for such losses
These are severe penalties and an indication of how much heinous cheque bounce cases are considered and the fact that early action should be taken.
Key Differences Between Cheque Bounce and Dishonour of Cheque
| Cheque Bounce | Dishonor of Cheque |
| Specific to insufficient funds or account issues | Broader term covering all reasons for non-processing |
| Under Section 138 of the Negotiable Instruments Act | May not always involve legal proceedings |
| Carries significant legal penalties | Could be a result of minor technical errors |
| Requires immediate legal notice for remedy | May not necessitate legal action |
Proactive Measures to Avoid Cheque Bounce
Cheque bounce incidences are well handled by legal means, it is always wiser to avoid such incidences. Here are some tips:
- Maintain Sufficient Funds: Lastly, always endeavor to make sure your account has enough balance to pay for any issued cheques.
- Check Cheque Details: Be very cautious concerning dates and signatures on cheques to be issued, as well as the amounts to be written on them.
- Avoid Overwriting: Check that there are no erasures, obliterations, or crossing out done on the cheque.
- Inform the Payee: In forms where the status of a cheque changes, it is recommended that the payee be informed on these changes.
- Update Bank Details: Make sure to keep your bank account current and to continue to use it in order to avoid technical problems.
How Law Chef Offers Assistance in Cheque Bounce Matters
It is not very easy to decipher the legal liability one can face in a cheque bounce case. It is where Law Chef comes in handy to offer legal advice to the clients. Here’s how:
- Drafting Legal Notices: Law Chef will help you to draft very effective cheque bounce legal notice as we ensure that professional legal writing is done.
- Legal Representation: This involves professional lawyers who defend your course in court, and fight for your rights.
- Negotiation Assistance: LawChef assists in settling, which is time-saving for you.
- Expert Guidance: They cover everything for their clients from what is cheque bounce penalties to how legal time works.
Conclusion
While knowledge of cheque bounce dishonour is significant to the issuer part and the payee part respectively, cheque bounce can happen to an individual on technical grounds but a cheque bounce attracts legal and financial consequences according Section 138 of the Negotiable Instruments Act. But if you encounter anything wrong, do not wait to contact Law Chef for professional legal advice to fight for your rights successfully.
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