A cheque is a negotiable instrument in India and is normally valid for three months from its date.

Cheque bouncing is one of the most common offences in the country, with over 40 lakh pending
cases in the Supreme Court. A cheque is said to be bounced when the payment stated on it is not
made and it is dishonoured.
A cheque can bounce for several reasons, which include insufficiency of funds, mismatch in
signature, stale cheques, post dated cheques or if there are corrections in the cheque without
authentication. The bank collects a penalty from the defaulter when a cheque bounces.
The important point here is that when a cheque bounces, it is a criminal offence in India. Therefore
under the Negotiable Instruments Act, 1881, the person who had issued the bounced cheque is
punishable by heavy fine and jail term also.
What is the legal remedy you have if you have been issued a cheque which gets
bounced?
Almost every bank gives a cheque return memo along with the returned cheque stating the reason
for the bounce. If you hold the cheque, you need to inform this to the drawer and ask if you can re-
present it to the bank within the 3 months period. If cheque is dishonoured even the second time,
then you can take legal action. As a first step, you can send a legal notice to the defaulter within a
period of 30 days from receiving the cheque return memo. The notice should contain all necessary
facts of the matter, including the details of the first time the cheque was dishonoured. The defaulter
needs to make a fresh payment within a period of 15 days from the receipt of this notice. However, if
he still doesnt make the payment within this time period, then you can file a complaint in the
magistrate court. This case should be filed within a maximum period of 1 month from the date of
expiry of the 15 days time period.
Remember that the complaint should be filed within the time frame specific. If this is not done, then
the case will become time barred and will not be entertained. When your case comes for hearing, the
defaulter can be punished with a jail term for two years and/or a penalty which can be upto twice the
cheque amount. The defaulter can appeal against the order within a period of 1 month of judgement.
Case 1: Bouncing of a rent cheque: In India, it is common practice for the landlord to take post
dated cheques from the tenant. In case a rent cheque bounces, the landlord can follow the above
procedure to recover the dues from the tenant. Sometimes, it may so happen that the tenant does not
have the funds simply because the landlord did not drop the cheque at the expected time. Therefore,
the landlord is bound to first inform the tenant and only then proceed with the legal process. There
may be another case when the tenant wishes to set off an amount from a particular months rent
towards some expense he incurred on behalf of the landlord, which the latter refuses to pay. If there
is a cheque bounce because of this, the criminal case will continue against the tenant till he is able to
establish that there was a legitimate set off.
Case 2: Bouncing of an EMI payment: When a cheque meant for an EMI payment on a loan is
dishonoured, the bank can also file a case against the defaulter. However, banks do not do this as the
first step. Firstly, hefty penalties, loan default charges and cheque bounce charges are levied. These
keep building up for every month of default and added to the EMI amount. Also, the defaulters
credit rating gets affected with every default he makes. In case of secured loans, banks also have the
security as collateral. If the borrower does not make payments even after repeated reminders, the
bank can give sufficient notice and auction the security to recover the dues.
Case 3: Bouncing of a cheque in a business transaction: If you receive a cheque from a
business debtor and this gets bounced, then you should follow the above procedure to recover dues.
In case of bounced cheques in business transactions, the added penalty would be the loss of face in
business circles, affecting your reputation and business deals.
Considering the huge number of pending bounced cheque cases in the courts, the Government is
mulling to amend the Negotiable Instruments Act which will restrict the payee from taking the
defaulted person to court. According to news reports, such a person who has defaulted in making the
payment will not face jail term and the cases will be handled only through arbitration and settlement
by Lok Adalats. This proposal has come under criticism from the common man, as it is believed that
this will only increase cases of payment default. A more stringent and rigorous punishment should be
put in place to reduce instances of bounced cheques in the country.