Every now and then, we face the issue where our cheque bounces, it may happen for all the silly reasons in the world, but it still is something that can cost you money. Here in this article, discover all that you may face as a penalty under cheque bounce.
Cheques are considered as the easy, safe, and common way to conduct financial transactions such as payment of fees, bills, salary, etc. and the repayment of the loan. In the case of cheque payment, the individual who has the bank account and who writes or draws the cheque is known as Drawer, and Drawee is his bank, while the individual to whom the money is made payable is known as Payee.
Charges & Penalty under Cheque Bounce
One of the most cognizable offenses in India is the Cheque Bounce. This offense comes under section 138 of the Negotiable Instruments Act, 1881. The majority of cheques are processed in the banks every day. Though, the penalty that is included under cheque bounce is way harsh.
Reasons for the cheque dishonor in India
- Signature Mismatch
- Insufficient Funds in the Bank Account
- The difference in the amount written in numerical and words
- Overwriting of the date mentioned in the Cheque
- Expired and Damaged cheque
- Doubt in the authenticity of the cheque
- Account closure
- Suspicion of the fraud by the bank
- Account number mismatch
- Death of the customer
Effects of cheque bounce on the customer
The customer can land into legal trouble if the cheque is bounced or dishonored. The accused can be fined with a huge bounced cheque penalty fee or even a prison term. Apart from this, the financial image of the individual will also be affected.
1. The negative effect on the credit score
If the individual is availing a home loan, but it has an insufficient amount in their account, then the processed amount will get bounced, and there are chances of rejection of the sanctioned loan immediately. Repeated cheque bounces can negatively affect the financial credit history of an individual, which will make it difficult for the individual to avail loans in the future.
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2. Restricted from traveling abroad
If the cheque is bounced or dishonored, then the individual cannot travel abroad. Because it is a criminal offense, the individual can only travel once the permission has been taken from the Court. Also, if the individual fails to attend the Court continuously for a long period, then the court has the authority to issue an arrest warrant.
3. The penalty under the cheque bounce
Nowadays, there have been many cases of cheque bouncing that have come forward, but most of them remain pending in the Court. The individual can complaint under section 138 of the Negotiable Instruments Act.
- If an individual is found guilty of dishonoring or bouncing off the cheque, then the individual is liable to a punishment of a maximum of 2 years of imprisonment.
- Also, a fine can also be included which might be extended to twice the amount that is mentioned in the cheque or both
- The bank has the authority to close the account for repetitive cheque bounce offenses and to stop the cheque book facility.
If more than one cheque is bounced, the Payee has the right to file different cases against each of the dishonored cheque raised, which is further issued for the defaulter. However, if the defaulter has the understanding that there has been a genuine mistake, then it can be overcome by paying a small fine to the bank for the cheque that has been bounced.
Conditions for initiating the prosecution
- The cheque must be drawn by the bounced and Drawee.
- The cheque is supposed to be presented to the bank within three months or within its validity, whichever is earlier. Earlier, the validity was six months now that has been reduced to three months.
- The payee is supposed to send the registered notice for the further payment after the cheque has been bounced.
- If the payee fails to pay the amount within 30 days from the receipt of the notice.
Who can file the case of cheque bounce?
If the cheque has been bounced, it is obvious that the Payee of the cheque will file the case. But in some of the conditions, the cases can be undertaken through a power of attorney. The complaint is going to appear before the Magistrate, and the Magistrate will further examine it.
Required documents for filing the cheque bounce case
- Bank return memo stating the dishonoring of the cheque
- Original bounced cheque
- Complaint itself
- Copy of receipts
- One of the most serious criminal offenses is cheque bounce that can leave the individual with imprisonment of approx. 2 years along with the fine twice of that mentioned in the cheque.
Duration of the case:
Already a lot of cases are pending in India, which gives us an image of the efficiency of our constitutional law. To close a case, it almost takes 1.5 years, but only if the individual is attending every hearing and you provide sufficient evidence.
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However, if the individual is irregular and leaves the city without attending any hearing, then it may take at least 3-5 years or even remain pending for way too long.