What is Cheque Bounce case?

According to the dictionary the meaning of the abstract term, ‘bounce’, with reference to an object is ‘move quickly up or back or away from a surface after hitting it’.

Similarly, bouncing of a cheque, literally, means when the cheque moves back or away from bank (surface) after hitting it (the bank).

A bank bounces back a cheque when the cheque is drawn for an amount which is more than the amount present in the bank account, at the time of the cheque ‘hitting’ the bank. The same can be interpreted in banking terms, in following way – When the bank refuses to honour the cheque due to insufficient funds in the account, it is called as a situation where the cheque is bounced.

What is the proceedings for Cheque Bounce under Section 138, Negotiable Instrument Act?

In case the drawer of the cheque, the one who writes or issues a cheque, is an individual then the proceeding under section 138 of the NI Act is to be initiated else if the drawer happens to be a company, then section 138 becomes redundant and section 141 plays the role and is exercised to prosecute the Managing Director of the said company.

The proceedings under Section 138, NI Act categorically support the fast track settlement where the purpose is to demand the payment and make the drawer know about possible prosecution in case of non payment / non settlement of due within 15 clear days.

In case of non payment / settlement of dues even on the expiry of 15 days, then a formal complaint needs to be put in front of the Magistrate within 30 days.

Points of Caution –

  1. A cheque drawn for the purpose of gift, donation or for discharge of any liability which the drawer is not legally liable for, then the Negotiable Instrument does not become enforceable.
  2. A cheque drawn in terms of compromise agreement or for not satisfying any debt or payment due is also not covered.