On daily basis, I met lot of people who are highly inquisitive to know the implications of cheque bouncing. But before you learn about the repercussions, let us first understand when a cheque is said to be bounced.
Conditions for a cheque to be considered bounced
A cheque is said to be bounced when the bank refuses to pay the cheque due to which the stated payment is not made and it is dishonoued. Usually, a cheque is dishonored due to two main reasons: one, insufficient funds in the bank account to honour the payment and two, technical reasons such as unmatched signature or write over on the cheque.
Is it a criminal offence?
If your cheque has bounced due to insufficient funds in your bank account, then definitely it is a criminal offence and you can be hooked under section 138 of Negotiable Instruments Act or depending upon the circumstances of the case, an aggrieved party can also file a suit against you for cheating or fraud. However, if your cheque has bounced due to technical reasons, then you will be liable to pay penalty only and it will not be a criminal offence. But in any way, you will be required to discharge your liability towards payee.
Penalties associated with cheque bouncing
Penalties associated with cheque bouncing differ from bank to bank and also from reason to reason (technical reasons or insufficient funds). In India, banks charges double penalty, i.e. the penalty is charged on the drawer as well the payee. As has already been mentioned that if a cheque is bounced due to insufficiency of funds, then it is a criminal offence and therefore it may result into imprisonment of the drawer for a period of 2 years or a payment of double the amount mentioned on cheque. The payee has a right to demand the payment along with the charges paid by him due to drawer’s dishonored cheque within 30 days of from the date of intimation to payor of such dishonor.
Other implications of cheque bouncing
Even if the aggrieved party does not file a suit against you, it impacts your creditworthiness. Whenever, you apply for a loan, bank usually asks for your last one year account statement. All such dishonoured cheques are reflected in your account statement. With so many cheque bounces, your credit worthiness is bound to be affected adversely. Apart from this, it also dents your goodwill in the market. Those who dealt with you in past may refuse to deal with you for they may consider you as a bad debt. And if a bounced cheque was drawn towards your loan repayment, then the lending bank or NBFC will also require you to pay late payment charges.
The best way to escape from all such nuisances is to write your cheque carefully. A great caution need to be exercised while filling the amount on a cheque. Beforehand, it should be checked whether you have sufficient balance in your account or not. Remember the old saying “a stitch in time saves a nine”. So, take necessary precautions and enjoy your banking and trade relations.
