One cheque bounces and everyone is in panic!! The person in whose favour the cheque was drawn is apprehended due to financial risks. On the other hand, the drawer of cheque is worried that one mistake will attract a lot of legal trouble. The Negotiable Instruments Act, 1881 is the statute which deals with cheques and the legal course to be followed while transacting through cheques. There are several reasons for which a cheque may be returned without encashment. What is the result if cheque bounces due to insufficient balance? Can it be settled? Is jail the only outcome? What exactly can be done for cheque dishonour for insufficient funds in the account? Here, we are discussing it all in detail and the related aspects.
What happens if cheque bounces due to insufficient balance?
If a cheque is dishonoured due to insufficient funds in the bank account of drawer of cheque, there are several possibilities. The same have been discussed below:
Cheque Bounce Case
People are very much familiar with a Court case for cheque bounce. Section 138 of NI Act states that if cheque bounce due to insufficient balance happens, the person in whose favour the cheque was drawn can proceed with a criminal complaint. It is termed as dishonour of cheque under the provision. Such a person is served with a legal notice for cheque bounce and then the matter reaches the Court. Both parties are given a chance of being heard. If the complainant is able to prove that the cheque was drawn in his/her favour against a debt, and the cheque could not be encashed as returned due to insufficient funds in the bank account. In turn, it should also be proved that the time limit for cheque bounce under NI Act was duly complied with, be it serving the notice or proceeding with a complaint. If everything is duly proved, the Court shall convict the drawer of cheque.
Punishment for Cheque Bounce
If a person is found guilty under Section 138 of Negotiable Instruments Act, 1881, the provision lays a punishment of imprisonment for a maximum period of 2 years, or with fine which may be extended to twice the amount involved in the cheque, or with both. This is about the cheque bounce. If the case also includes cheating, breach of trust or any other criminal offences, the punishment may be extended as well based on the specific charges attracted against the drawer of cheque.
Payment of Amount
The purpose for cheque bounce case is to bring criminal consequences to bring strict backing for transactions through cheques. The aim is to bring a sense of security for money transactions through cheques, and not to punish the person. Here, we are hinting that if cheque bounces due to insufficient balance, the drawer of cheque may pay the amount involved in cheque through some other means. Since the aim is money, such a payment can prevent the legal consequences. The drawer of cheque can thereby avoid litigation by making the payments. There can be negotiations and direct communication between the parties at this point. An assurance to make the payments in installments over a certain period of time may also be agreed upon, keeping up with the limitation period for cheque bounce cases.
Compounding in Cheque Bounce Case
People often have this query that if cheque bounces due to insufficient balance, the party proceeds with filing a complaint and case is registered, can there be a compromise in cheque bounce case? In legal terminology, is compounding an option in cheque dishonour matters? The Supreme Court has time and again answered this one. The major rule is that if the complainant agrees to compromise after payment of amount involved in cheque, the matter may be compounded. It mostly depends upon whether the complainant wishes to press the charges for bearing with the hardships due to non-payment after cheque bounce.
Two Words
People dealing in cheques for paying off debts are always advised to keep an eye on the account balance. Otherwise, they may just opt for some other mode of payment. The reason for such caution is that if cheque bounces due to insufficient balance, or even if Stop Payment or other filters were set for the transaction, it may attract the provision under Section 138 of NI Act. The person may have to go to jail and pay the fine as well. Thus, better safe and sorry while transacting through cheques.
