Dec 7, 2017
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Cheque Bouncing : A Criminal Offence

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Cheque Bouncing : A criminal Offence


If account is short with funds, cheque will bounce resulting in cheque bounce. It is a negotiable instrument. Cheque is a promissory note which promises to pay certain sum of amount to, or the order of, certain person or the bearer. Crossed and Account payee cheques are not transferable.  In legal context, drawer is person who issues cheque. Payee is the owner  and bank is drawee. Crossed cheques are most secured ones . It becomes stale after 6 months from the date of issuance. It becomes due on date mentioned on it. The person issuing cheque should ensure whether his account has sufficient balance or not.

“It has given rise to the suspicion that the consultants tend to recommend generous pay cheques for bosses in order to curry favour with management and thus keep the other work rolling in”.

The Economist, Article named  “Cheques and balances” Retrieved on 2nd December 2017, Original article by the Economist

Types of Negotiable Instruments

The negotiable Instrument Act covers cheque bounce.

Features of Cheque:

  1. It has to be in writing
  2. It has to be an unconditional order
  3. Banker has to be specified
  4. Payment should  be to a specified person
  5. It should be payable on demand
  6. It should be for a specific some of money
  7. Should also have the signature of the drawer

Cheque Bounce/ cheque dishonoured

If a person do not have sufficient funds in the account after issuing the cheque then it will get dishonoured or bounced. The person issuing cheque should ensure whether his account has sufficient balance or not. If account is short with funds, cheque will bounce. Bouncing is also known as dishonouring of cheque. If cheque is presented in the bank for receiving payment and drawer’s account do not have sufficient balance then it will end up with bouncing of cheque.

Bouncing of a cheque is a criminal offence under The Negotiable Instruments Act, 1881. The payee can present the cheque whenever but within 6 months from the date of cheque. If dishonoured, then can proceed for prosecution. Payee can only prosecute if the amount mentioned in the cheque is not available in the drawer’s account.  The payee can not prosecute against drawer if issued as gift or as loan or for illegal transaction.   The drawer should re-issue the good cheque if given a chance.

The former chief financial officer of beleaguered Kingfisher Airlines was  sentenced to an 18-month imprisonment  for two cheque bounce. It would be a mistake to take cheque bounce matters lightly.  Finance Minister Arun Jaitley in his Budget Speech said the government might amend the Negotiable Instruments Act suitably to “ensure that the payees of dishonoured cheques are able to realize the payments”.


Under Section 138 of the Negotiable Instruments Act, 1881 as amended up to date, person guilty of dishonouring cheque gets the notice from payee. It should be send within 30 days from the date of receiving Cheque Return Memo. Drawer gets a chance to Re-issue another cheque. The drawer has to pay late charges if again dishonoured.


  1. Penalty :  Both have to pay penalty. If the dishounoured cheque is against repayment of loan, in such case, the person will additionally have to pay late payment charges.
  2.  Damage To Credit History : Dishonouring of cheque  impacts your credit history. Financial institutions report your payment activities to credit bureaus. If lenders have good credit score then they can trusted. It will help you build good CBIL score and makes lending easy to financial institution.

Reasons of cheque bounce

  1. Insufficient funds.
  2. Wrong signature.
  3. Alterations.
  4. Stoppage of payment.
  5. Frozen Account.
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The Companies Act, 2013

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