In India, cheque bounce cases are governed by Section 138 of the Negotiable Instruments Act, 1881, which makes dishonoring a cheque a criminal offense. Common reasons for a cheque bounce include insufficient funds, signature mismatch, or a closed account. The payee must send a legal notice within 30 days of the bounce and can file a criminal complaint if payment is not made within 15 days.
Penalties for cheque bounce include imprisonment of up to 2 years, a fine up to twice the cheque amount, or both, in addition to civil liability for the cheque amount with interest. The payee can also file a civil suit for money recovery or take action under Section 420 of the IPC if fraud or cheating is involved.
Defenses for the drawer include claims of no legal liability, the cheque being a gift or loan, or a forged cheque. Recent updates include the proposal to decriminalize cheque bounce offenses and the introduction of the Cheque Truncation System to reduce fraud and speed up the process.
