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A cheque is said to be dishonoured or bounced when the said cheque is presented in the bank for encashment, but it is not paid. The reason for non-payment can be any of the following; insufficient funds, Stop Payment instructions, discrepancy in the drawer’s signature, discrepancy in the account details, amount entered, cheque with overwriting or date not properly entered.
Section 138 of the Negotiable Instruments Act, 1881 deals with dishonor of cheques. When a cheque drawn by a person on an account maintained by him with a banker for payment of an amount to a person from that account, is returned unpaid due to insufficient funds in the account or such amount exceeds the limit set for the account, such person may be said to have committed an offense as per the provision of the Act. The punishment for dishonor of cheque is imprisonment upto 2 years; or fine upto twice the amount of cheque value; or both.
The validity of a cheque is three months. It means that a cheque can be presented with the bank for encashment anytime within 3 months from the date of issue of the cheque. In the event a cheque is dishonoured, the cheque can be deposited again if it is within the time period of three months from the date of issuance.
Any or all of the following remedies can be availed in the event of dishonor of cheques:
After the receipt of cheque return memo in furtherance of the dishonor of cheque, the payee is required to issue a legal notice to the drawer of the cheque calling upon him for payment of the cheque amount. In the event the payment is not received, after the expiry of notice period (15 days), criminal proceeding under the Negotiable Instruments Act is to be instituted within 30 days. Thus, a complaint is to be filed with 45 days from the date of issue of the legal notice.
