In India, the bouncing of a cheque is an offense under Section 138 of the Negotiable Instruments Act, 1881.
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Cheque Bounce What is the punishment for a bounced cheque Learn about the rules and laws in India. In India, the bouncing of a cheque is a serious offense, and there are provisions for strict punishment for it. Quite recently, Bollywood actor Rajpal Yadav had to serve a jail term in a cheque bounce case. The Delhi High Court found Rajpal Yadav guilty in the cheque bounce matter, following which he was incarcerated in Delhi’s Tihar Jail. Here, we will explore the penalties associated with a bounced cheque and the specific laws and regulations governing this issue in India.
What is a Cheque Bounce?
In India, the bouncing of a cheque constitutes an offense under Section 138 of the ‘Negotiable Instruments Act, 1881.’ When a cheque recipient deposits a cheque at their bank for payment, and the bank returns it unpaid—typically accompanied by a memo citing ‘Insufficient Funds’ in the drawer’s (the person who issued the cheque) bank account—this is referred to as a cheque bounce. For instance, suppose a friend gives you a cheque for ₹2 lakh, which you take to your bank to have cleared. However, when your bank initiates the process to clear the cheque, it discovers that your friend’s bank account does not, in fact, contain the ₹2 lakh amount. In such a scenario, your bank will return the cheque, citing insufficient funds.
What Are the Penalties for a Bounced Cheque?
Under Section 138 of the Negotiable Instruments Act, 1881, three types of penalties may be imposed in the event of a bounced Cheque. According to ClearTax, the first penalty for a bounced Cheque involves the offender paying a fine amounting to twice the value of the check. The second penalty entails imprisonment for a term extending up to two years. The third penalty involves a combination of both—the offender may be required to pay a fine equal to double the check amount in addition to serving a prison sentence of up to two years. To avoid the serious offense of a bounced Cheque, one must take special care to ensure that the bank account from which the check is issued contains sufficient funds.
