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Cheque bouncing, also known as cheque dishonour, occurs when a bank refuses to process a cheque due to insufficient funds in the issuer’s account or other discrepancies. It is a punishable offence under Section 138 of the Negotiable Instruments Act, 1881, in India and similar laws in other countries.
Consequences of cheque bouncing can be both civil and criminal. The payee has the right to issue a legal notice within 30 days of receiving the dishonoured cheque. If the drawer fails to settle the payment within 15 days of notice, the payee can initiate legal proceedings.
To avoid cheque bouncing, it is essential to ensure that the account is sufficiently funded and that all cheque details are correctly filled out.