Cheque bounce is one of the most common types of financial offences in India. A cheque bounce can lead to dire consequences for the issuer. Given below are the ways a cheque bounce can affect the issuer:
A cheque is referred to as a negotiable instrument as it is accepted in lieu of payment of money. However, negotiable instruments started losing their credibility by not being honoured on presenting it to the bank. The reason for a cheque bounce can be an insufficient balance in the drawer’s bank account, signature mismatch or wilful default. As per Section 138 of the Negotiable Instrument Act, 1881 the dishonour of cheque is a criminal offence and is punishable under law. Section 138 of the Negotiable Instrument Act, 1881 states:
Dishonour of cheque for insufficiency of funds in the account: Where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall, without prejudice to any other provisions of this Act, be punished with imprisonment for a term which may be extended to two years, or with fine which may extend to twice the amount of the cheque, or with both: Provided that nothing contained in this section shall apply unless—
Dishonour of cheques can only be filed before the court within whose local jurisdiction the bank branch of the payee, where the payee presents the cheque for payment is situated.
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