Legal Questions

Ans.

After receiving a legal demand notice in a cheque bounce case, the drawer has 15 days to make the payment.

 Explanation

• When a cheque is dishonoured, the payee must send a written demand notice to the drawer within 30 days of receiving the cheque return memo.

• Once the drawer receives the notice, he gets 15 days to clear the cheque amount.

• If he pays within these 15 days, the matter ends and no case can be filed under Section 138 of the Negotiable Instruments Act.

• If he does not pay within 15 days, then after the expiry of this period, the payee can file a complaint in the Magistrate Court within the next 30 days.

The drawer has 15 days from the date of receiving the notice to make the payment. If paid, no case; if not, the payee can proceed with a Section 138 complaint.

Ans.

The time limit to issue a demand notice in a cheque bounce case is 30 days.

• When a cheque is dishonoured, the bank gives the payee a Cheque Return Memo stating the reason for dishonour.

• From the date of receiving this return memo, the payee must send a legal demand notice to the drawer within 30 days.

• The notice must demand payment of the cheque amount within 15 days of the drawer receiving it.

• If the payee fails to issue the notice within 30 days, he loses the right to file a case under Section 138 NI Act (though a civil suit for recovery may still be possible).

A demand notice must be issued within 30 days from the date the bank informs the payee of the cheque dishonour.

Ans.

 Punishment for Cheque Bounce under Section 138 NI Act

If a cheque is dishonoured and the drawer fails to pay even after receiving the statutory notice, the court may impose the following punishment under Section 138 of the Negotiable Instruments Act, 1881:

1. Imprisonment – Up to 2 years.

2. Fine – Up to twice the cheque amount.

3. Both – The court can award both imprisonment and fine together.

 Key Points

• The offence is bailable, compoundable, and non-cognizable.

• This means the matter can always be settled (compounded) between parties at any stage.

• Courts often prefer compensation/fine over imprisonment, especially if the drawer agrees to pay the cheque amount with interest/penalty.

• In many cases, courts order the drawer to pay double the cheque amount as fine/compensation rather than sending him to jail.

 Example

If a cheque of ₹5,00,000 bounces:

• The drawer may face imprisonment up to 2 years, OR

• A fine up to ₹10,00,000 (twice the cheque amount), OR

• Both, depending on court’s decision.

The punishment for cheque bounce under Section 138 is up to 2 years in jail, or fine up to double the cheque amount, or both, but in practice, courts usually focus on ensuring repayment with penalty through fine or settlement.

Ans.

A cheque may bounce when the bank refuses to honour it and returns it unpaid. There are several reasons why this can happen:

 Common Reasons for Cheque Bounce

1. Insufficient Funds – The drawer’s account does not have enough balance to cover the cheque amount.

2. Signature Mismatch – The drawer’s signature on the cheque does not match the specimen signature with the bank.

3. Account Closed – The drawer has closed the account before the cheque was presented.

4. Stop Payment Instruction – The drawer issues stop payment instructions to the bank.

5. Post Dated Cheque – The cheque is presented before the date mentioned on it.

6. Stale Cheque – The cheque is presented after its validity period (3 months from the date).

7. Overwriting/Alteration – Any correction on the cheque without authentication can cause dishonour.

8. Exceeds Arrangement – When the cheque amount is more than the overdraft or credit limit allowed.

9. Frozen or Dormant Account – If the account is frozen due to legal issues, or marked inactive.

10. Technical Errors – Wrongly filled details like mismatch in words and figures, torn or damaged cheque, or incomplete details.

 Importance

• The reason for cheque bounce is mentioned in the Cheque Return Memo issued by the bank.

• Only certain reasons (like insufficient funds, account closed, stop payment) attract criminal liability under Section 138 NI Act.

• Other reasons may be treated as technical or civil issues.

A cheque can bounce for financial reasons (like insufficient funds) or technical reasons (like signature mismatch or expired cheque). The exact cause is always recorded by the bank in a return memo.

Ans.

A cheque bounce or dishonoured cheque means that the bank has refused to make payment against the cheque and has returned it unpaid to the payee.

 Explanation

• When a cheque is deposited, the bank checks whether the drawer’s account has sufficient funds and whether all details are correct.

• If the bank cannot process the cheque for reasons like insufficient funds, signature mismatch, account closed, stop payment, or technical errors, it marks the cheque as dishonoured.

• The bank then issues a Cheque Return Memo to the payee stating the reason for dishonour.

 Legal View

• A cheque that bounces due to reasons like insufficient funds or account closure can attract criminal liability under Section 138 of the Negotiable Instruments Act, 1881.

• The drawer may face imprisonment up to 2 years, or fine up to twice the cheque amount, or both, unless the payment is made within 15 days of receiving a demand notice.

 A cheque bounce or dishonoured cheque is when the bank refuses to honour the cheque and returns it unpaid, usually due to lack of funds or other defects, and it may lead to legal action against the drawer.