If a cheque present to the bank and this cheque is bounce and it return to the cheque beneficiary unpaid. It offers a legal notice against the person who has issued this cheque under section 138. Such notice must be presented within 30 days to the cheque issuer. If a legal notice is issued it is the sole responsibility to make the payment of the cheque issuer.

Cheque bouncing is considered as a serious and punishable along with imprisonment offence in India. There is a wide provision under Section 138 of the Negotiable Instrument (NI) Act.

REASONS OF CHEQUE BOUNCE

• There are several reasons of dishonor of cheque as following:-
• If a person issue a cheque of rupees more than the fund available in his/her account. In other words due to having insufficient funds in the bank account.
• Since the validity of every cheque is up to 3 months therefore the date on the cheque has expired i.e. more than the three months from the current date.
• If the amount mentioned in the word does not match the amount mentioned in the numbers.
• If the signature on the cheque do not match with the original signature of the cheque issuer as per his bank account.
• Postdated cheque (PDC Cheque) – If a cheque presented in the bank mentioning the future date which is yet to come, it also offers a legal notice.
• In case a cheque is not in a good condition for several points of view. It may damage, tern or spoiled, few details are not clear visible and readable etc. This type of cheque will be bounced.
• If a cheque is found over writing without authentication of issuer on a cheque it will bounce. If you make a mistake while writing on cheque do not issue it. In that case a fresh cheque should be issued.

WHEN CAN A LEGAL NOTICE BE ISSUED?

When a cheque is bounced due to majorly insufficient fund or any other reasons and issuer of the chque is not ready to pay immediately due to non-payment of the cheque. In this case payee is liable to send a notice by and advocate on his/her behalf to the issuer of the cheque. A legal notice indicates that the cheque beneficiary will proceed with a legal action if the payment for the cheque is not done immediately.

Following condition must be followed in case of dishonor of the cheque-

• The cheque must have been provided towards an accountability.
• The cheque should have been presented within 3 months by the beneficiary.
• The cheque should have been returned by the bank due to insufficient funds.
• The payee within 30 days of the receipt of information from the bank that funds are insufficient, makes a demand for the payment by giving a legal notice in writing.
• If the cheque drawer deny to make payment of the said amount within 15 days of the receipt of the legal notice against bounced cheque.

If the cheque was issued as a gift, towards any unlawful purposes, then the drawer cannot be prosecuted in such cases.

LEGAL ACTION

Under the Negotiable Instrument Act 1881 is applicable for the cases of dishonor of cheque. However this Act has been amended time to time since then.

As per the Section 138 of the Act, dishonor of the cheque is a criminal offence and it is punishable by imprisonment up to two years or with monetary penalty or with both as said above.

If payee decides to proceed legally, then the drawer must be given a chance of paying immediately. This chance should be given only in form of notice in writing.

If the drawer makes payment within 15 days from the date of receipt of the notice then drawer does not consider for committing any offence.

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