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A Cheque is simply a bill of exchange drawn upon a predefined broker and is payable on request/demand. Legally, the individual who has given the cheque is called 'drawer' and the individual in whose favor the cheque is given is called 'drawee'.

A cheque is viewed as the most widely recognized, credible and safe technique for making money related transactions in business as well as in the individual capacity. In any case, cheques are one of the primary reasons for legal discord in India.

What is ‘Cheque Bounce’?

‘Cheque bounce’ is an instance where a cheque is submitted to a bank for payment and gets dismissed by the bank for various reasons. The bank returns such cheque to the holder, alongside a ‘Return Memo’ stating the reason why the cheque bounced from the bank.


There may be various reasons for cheque bounce. These include:

  • When there is insufficient fund in the guarantor's account.
  • The signature of the issuer recorded in the bank does not match with the one on the issued cheque.
  • The date mentioned on the cheque is distorted or unreadable.
  • The date of the cheque when it was issued is beyond the expiry limits.
  • The sum mentioned in the cheque in words and numbers do not tally.
  • The cheque is torn or damaged.
  • When any overwritten text or scribbling found on the cheque.
  • The bank suspects fraud or forgery concerning the cheque.
  •  The account number to which the cheque is drawn does not match.


Cheque bounce is one of the most widely recognized monetary offences in India. It can make unfortunate outcomes to the issuer. The references mentioned beneath are a few ways through which a bounced cheque can affect the issuer:

1. Bank Penalty: In case of a cheque bounce, the defaulter and the payee are charged a penalty amount by their banks. This punishment is commonly a ‘Not Sufficient Funds’ (NSF) expense, e.g. when there are deficient funds in the account and the bank chooses to bounce the cheque. The measure of this charge relies on the reasons and nature of cheque bounce alongside the type of account.

2. Negative effect on the CIBIL score: A cheque bounce can gravely affect the issuer’s credit history as a consumer to an extent that he may get denied a loan later. To guarantee an effective CIBIL score, one should consistently ensure that his cheques never get dishonored.

3. Civil or Criminal action against the issuer: A bounced cheque can likewise draw a civil or criminal activity against the issuer if the aggrieved party does not get the guaranteed funds. In a circumstance where a cheque has been bounced, the aggrieved party has a choice to file a case under Section 138 of the Negotiable Instruments Act, 1881 or Section 420 of the Indian Penal Code, 1960 i.e. cheating.

In the event of a case filed under Section 420, a non-bailable warrant may be given against the issuer of the cheque. Nonetheless, to start proceedings, a case of cheating must be determined against the issuer. On the thin chance that the bounced cheques are multiple, separate cases for various cheques may be documented.

4. Other Risks: According to the RBI guidelines, the banks can deny the issuance of checkbooks to a client if he has been charged in cheque bounce to a minimum of four times for an amount of over Rs. 1 Crore. Moreover, if the cheque that has bounced is the one given as an EMI towards the loan, the bank has all the rights to issue a legal notice and deduct the penalty.


Section 138 of the Negotiable Instruments Act, 1881, is the essential law with regards to cheque bounce cases. Such cases have seen an ascent in their numbers in recent times. When a cheque bounces in a bank, the bank sends a Cheque Return Memo to the issuer which refers to the cause behind it.

Nonetheless, if the cheque bounces because of some intentional activity by the issuer, or on any grounds referenced under Section 138 of the Negotiable Instruments Act, 1881, for cheque bounce; legal actions can be taken against cheque bounce in India.

The cheque can be deposited again within 3 months, after information and assurance from the issuer, of the cheque being honored. Another way which could be adopted after receiving the Cheque Return Memo from the bank is sending a legal notice to the issuer within 30 days of the cheque bouncing. The legal notice must contain all the pertinent details such as the amount payable, the issue date on the cheque, the date of deposit and the date it was returned. If the issuer does not pay the promised amount within 15 days of receiving the legal notice, a case can be lodged under Section 138 of the Negotiable Instruments Act, 1881, in Magistrate’s Court within 30 days after the expiry of 15 days’ notice period. Failure in doing so would lead to the case being considered as a bogus cheque bounce case and the Magistrate may decline to admit the case in the absence of a valid and justifiable cause.

The cheque bounce complaint needs to be filed with an affidavit and requisite documents related with the cheque bounce as mentioned earlier. Once the complaint is recorded in court, the Magistrate issues summons for the physical presence of the issuer before it. If the cheque issuer is seen as guilty, he might get punished or penalized or both under Section 138 of the Negotiable Instruments Act, 1881. A civil or summary suit can likewise be filed to recuperate the expense incurred to recover the amount and interest on the amount.

The case for cheque bounce can be filed against both, an individual and an organization. Regardless of whether an individual or an organization has taken a loan from the bank and has constantly paid installments on time but the cheque bounced for one EMI instalment, the banker may still file a case.


Cheque bounce cases are one of the most widely recognized offences influencing the present financial world. A cheque bounce can prompt various ramifications for the payee just as the collector. In case any action isn't made against the payee by the recipient within the stipulated time, it can likewise lead to the absence of any solution for the beneficiary of the cheque as these are time-bound. It is thus essential to address a cheque bounce case at the earliest to avoid its consequences.

By: Gagan Gandhi

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