Understanding the Cheque Bounces

Our everyday use of technology has had a significant impact on how we conduct financial transactions. For many people, executing financial transactions has become more convenient and effective with the introduction of digital payment methods. Digital payments provide a faster way to complete transactions—no more standing in line or fretting about misplacing paper cheques. With just a few smartphone touches, we can now make payments and transfer money, simplifying and speeding up banking operations. But even with the ease of digital payments, many people still prefer to trade financially with cheques. For many years, people have regarded cheques as a secure way to send money and make purchases. However, there is a chance of a “bounce” or “dishonor” when using cheques. A “dishonored cheque” is one that the bank has returned for any number of reasons; this can lead to fines, penalties, or even jail time which is conveyed to the other faulted through cheque bounce notice.

A cheque is a formal promise made in exchange for a certain amount of money from the payer (the person writing the cheque) to the payee (the person receiving it). Ideally, money is transferred from the payer’s account to the payee’s account by the payer’s bank. Nevertheless, there are instances in which the bank of the payer or the bank of the payee declines to honor this agreement. There could be several causes for this “decline.” When this happens, the cheque bounces and is referred to as a “bounced cheque .”

What is a Cheque Bounce Notice?
According to Section 138 of the Negotiable Instruments Act, 1881 (“Act”), bouncing a cheque is a crime that carries a maximum two-year jail sentence, a fine up to double the value of the cheque , or both. A cheque is said to have bounced when the payee delivers it to the bank for payment and it is returned unpaid with a memo stating there are not enough funds.

A cheque bounce can happen for a number of reasons, but it becomes an offense under the Act if the bounce is caused by insufficient money in the drawer’s account. The cheque that is being presented for payment must be rejected by the bank with a return memo indicating that there are not enough funds. In this situation, the cheque’s payee may send the drawer a notice requesting payment of the cheque amount, known as a “cheque bounce.”

Cheque Bounce Notice vis-a-vis Negotiable Instrument Act
Section 138: According to Section 138 of the Negotiable Instruments Act, bouncing a cheque due to insufficient money is considered an offense and is subject to jail. It states that if someone writes a cheque on an account they own to pay someone else and the bank returns the cheque unpaid because there aren’t enough funds to cover the cheque, the person who wrote the cheque has committed an offense.