Cheque bounce Law Videos - Recourse in a cheque bounce case


In-case a cheque submitted to a bank bounces, no immediate prosecution takes place, rather a reasonable time frame is given to the defaulter to make good the payments so owed, so time is provided by the bank to make an attempt to pay the dues a second time before actual prosecution takes place.

The bank provides a period of time before prosecuting a person who has submitted a cheque which has bounced. This is because it is often the case that if the cheque bounces due to insufficient funds, the person in good faith did not know that the funds were not sufficient. No prosecution by the party in whose favour the cheque was drawn are undertaken either in this time period.

The main legal provision related to bouncing of cheques is section 138 of the Negotiable Instruments Act, 1881. 
When a cheque is dishonoured, the drawee bank immediately issues a ‘Cheque Return Memo’ to the banker of the payee mentioning the reason for non-payment. The payee’s banker then gives the dishonoured cheque and the memo to the payee.

The holder or payee can resubmit the cheque within three months of the date on it, if he believes it will be honoured the second time. However, if the cheque issuer fails to make a payment, then the payee has the right to prosecute the drawer legally.

A requisite degree of leniency is given to a person who submits a cheque which bounces before legal prosecution. However, this is balanced on the other side by providing penal provisions by which persons can be prosecuted in case payment is not made even 3 months after the cheque first bounced.