Cheque Bounce (NI Act Section 138)

Cheque bounces are becoming more regular these days. Payments are made via cheque in the majority of transactions, whether it is a re-payment of a loan or payment of fees for commercial purposes. These large-amount cheques are occasionally left unpaid and returned by the bank on which they were drawn. Section 138 of the Negotiable Instruments Act of 1881 provides for penalty in such circumstances (hereinafter the Act). The act of dishonouring a check, as defined in section 138 of the Act, is regarded a criminal offence.

As trade and commerce grow, so does the use of checks, as well as the number of cheque bouncing problems. Cheques make up a large part of the country’s transactions. Cheques are used to pay for a variety of things, including loan payback, salary payment, and company transactions. Issuing a check as a form of payment also provides proof of payment, and it is one of the most dependable payment methods for many people. The sanctity of cheque transactions remains, especially for small and medium enterprises, while India’s businesses continue to move digital. Dishonour of checks is becoming more common, and it can have a negative influence on SME and MSME growth and survival.

A civil suit can also be instituted against the drawer for payment of the cheque amount. In the case of the institution of a civil suit, the payee cannot issue a cheque bounce notice. The payee can only issue legal notice for recovery of the amount. The cheque bounce notice can be issued against the company, and a criminal suit can be initiated against a company when the company issues the cheque, and it bounces due to an insufficient amount. When a criminal suit is initiated under the Act, the company and its directors will be punished for the offence of cheque bounce.

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