What Happens if a Cheque Bounces?

Most people have this query: if check bounces what happens? When a cheque bounces or is dishonoured, several legal and financial consequences follow under Indian law (especially under Section 138 of the Negotiable Instruments Act, 1881). It includes penalties, damage to credit score, account restrictions, etc.

What Happens If a Check Bounces?

A cheque may bounce due to insufficient funds in the drawer’s bank account, expired validity (cheques are valid for three months from the date of issue), signature mismatch, overwriting, damaged or disfigured cheque, or mismatch between the written and numeric amounts.

1. If the cheque bounces due to insufficient funds (i.e. failure to honour a legally enforceable debt), the payee must send a cheque bounce notice in writing to the drawer.

2. This must happen within 30 days of receiving the bank’s return (memo) of the dishonoured cheque. The drawer is then given 15 days from receipt of this notice to make good the amount.

3. If the drawer fails to pay within those 15 days, the payee can file a criminal complaint under Section 138. The complaint needs to be filed within 30 days after the expiry of those 15 days.

4. Upon conviction under Section 138, the drawer can face imprisonment of up to two years, or a fine of up to twice the cheque amount, or both.

5. The drawer may also incur bank penalties/fees for the bounced cheque. 

Additionally, there could be reputational harm and possible difficulty dealing with banks or creditors. I hope you understand what happens if the check bounces.

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In India, a bounced cheque is a significant financial and legal issue that occurs when a cheque cannot be honored due to insufficient funds or other reasons. Here is what happens if a cheque bounces and common reasons why cheque bounces off.

The most common reasons for a cheque to bounce are:

• Drawer’s account does not have enough funds to cover the cheque amount. 

• The signature on the cheque does not match the one on record with the bank. 

• The cheque amount exceeds the account balance or any agreed overdraft limit.

• For issues like incorrect date, amount, or if the cheque is post-dated and presented before the specified date, banks usually return such a cheque. 

• Banks usually levy a penalty for cheque bounce, known as "Cheque Return Charges." These charges vary from bank to bank and are deducted from the drawer’s account.

If Check Bounces What Happens?

Here's what happens when a cheque bounces and the implications involved:

1. Legal Consequences

   : The drawer of the bounced cheque may face legal action under Section 138 of the Negotiable Instruments Act, 1881. If the payee files a case, the drawer may face legal proceedings and penalties.

2. Credit Impact:

   A bounced cheque can affect the drawer’s creditworthiness and reputation. Frequent bouncing of cheques can lead to blacklisting or restrictions on banking services.

3. Collection Proceedings:

   The payee may initiate recovery proceedings through legal means to recover the cheque amount, including filing a civil suit. The drawer should immediately resolve the issue by either depositing sufficient funds or addressing any technical errors and reissuing the cheque.

It’s advisable to communicate with the payee and settle the matter amicably to avoid legal complications.

If a cheque bounces, prompt action to address the issue and communicate with the payee can help mitigate further consequences. This is all about what happens if a cheque bounces.

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One of the most common financial offences in India is unsurprisingly the cheque bouncing situation. It is one of the worst financial failures that can happen on the issuer’s end. But what happens if a cheque bounces, you ask? Well let me tell you there are several consequences. I am going to share exactly what are the consequences of such financial failure and how it affects your financial health.

There are several reasons why your cheque bounces. Some of the most common reasons for a bounced cheque are:

• You mentioned incorrect date on the cheque

• Your signatures don’t match

• The amount entered mismatches with the figure you entered

• The cheque is damaged

• You ended up overwriting on the cheque

• Insufficient funds in your bank account

Let us now look at what happens if a check bounces here:

If your bank account has insufficient funds or your signature mismatch then your bank can charge you for the same. In case your cheque has bounced against a loan repayment, you will have to pay the late payment charges as well.

The receiver of the funds has the right to press civil or criminal charges against you for a bounced cheque. Under Section 138 of Negotiable Instruments Act or section 417 and 420 of Indian Penal Code, you can face prosecution in such a case. You can face a jail term of 2 years or a fine up to twice the cheque amount or both.

When a cheque is dishonoured the CIBIL score is affected badly. If you fail to recognize and act on a bounced cheque in time, your CIBIL score will drop constantly and that doesn’t reflect quite well on your financial records. You may be denied a loan and it will take a lot more effort to bring back your CIBIL to a decent level.

In some cases, banks also refuse to issue cheque books further. Especially for repeated offenders.

This is what happens if a cheque bounces. So make sure that your payments are made in time and you don’t end up making any mistakes that will lead to your cheque bouncing.