A cheque is a type of bill of exchange which is payable on demand. The cheque is defined in Section 6 of the Negotiable Instruments Act, 1881. There are three parties in a transaction, the person who issues the cheque is known as the drawer, the person under whose favour the cheque is issued is known as the drawee and the person to whom the payment is made is known as the payee.

A cheque bounce is a situation in which the cheque cannot be processed because of the insufficient funds that are available in an individual banks account.

There are many reasons which can lead to a cheque bounce. To overcome such a situation, Negotiable Instruments law says that the drawee has to issue a cheque bounce notice or a demand notice to the drawer. According to the section 138 of Negotiable Instruments Act, 1881, the Cheque bounce notice states that if the amount due is not paid within the prescribed time, and then the drawee will initiate legal proceedings under the said law against the drawer.

Section 13 of the Negotiable Instruments Act 1881 defines a Negotiable Instrument and states that a negotiable instrument means a bill of exchange, promissory note, or a cheque. Section 138 of the Negotiable Instrument Act 1881 simply states the provision and punishment relating to the dishonour of cheque for insufficiency of funds in the bank account of the drawer.

If a situation arises and there is any cheque issued by the drawer to the drawee to pay a sum of amount and the cheque is returned or dishonoured by the bank as there is an insufficient amount in the bank accounts to clear the cheque. The cheque is also dishonoured by the bank if the amount is exceeding the amount that has been arranged to be paid from that bank account by an agreement made between the bank and the drawer. Therefore, an individual can file a criminal case under Section 138 of the Negotiable Instrument Act 1881.


  • A wrong date mentioned on the cheque:

    It has been observed that the drawer of the cheque mentions a wrong date in the cheque which results in cheque bounce. Not only this problem but if he mentions a date which is more than three months old, then also the cheque is dishonoured or is not cleared by the bank. Some of the situations arise when the cheque is post-dated and drawee deposits the cheque earlier than the date, it results in cheque bounce. To avoid this thing to happen, the drawer must mention the correct date.

  • Signature is mismatched:

    The bank will dishonour the cheque if the drawer’s signature is mismatched. It has always seen that many times people tend to forget their signature and then end up signing a wrong signature on the cheque which results in the bank to dishonour the cheque. If the signature does not match with the banker’s record, it results in cheque bounce.

  • Insufficient Funds in the drawer’s bank account:

    The bank dishonours the cheque if there is any shortage/lack of funds in the drawer’s bank account from which the cheque has been issued. In case of insufficient funds in the bank account, the bank will stop the payment. Insufficient funds are one of the main reasons for cheque bounce cases. To avoid this problem, the drawer must ensure that there is sufficient balance in his bank account before issuing any cheque to the drawee.

  • Overwriting on the cheque:

    A bank has the authority to dishonour the cheque if the drawer has scribbled or has done overwriting on the cheque. The cheque must be kept in good condition. If the bank finds any of these things on the cheque, and is in a bad condition or is damaged and the details mentioned in the cheque are not clearly/properly visible, then it clearly results in cheque bounce.

  • The different amount of mentioned in words and numbers sections:

    The bank dishonours the cheque if there is an unusual amount mentioned in the words and numbers in the cheque. The amount which is specified in words must be the same as the amount mentioned in the numerical representation. This small mistake can lead to a cheque bounce.


  • The Cheque bounce or dishonour of the cheque is considered as a serious offence that is committed by the drawer under section 138 of the Negotiable Instrument Act 1881. The first step is to issue a cheque bounce notice to the drawer by the drawee and it should be issued within 30 days from the date of dishonour. The legal notice must consist of information relating to the nature of the transaction, the amount specified in the cheque, the date on which the cheque was deposited, the date on which the cheque was dishonoured, the reason behind cheque bounce/dishonoured and to request the payment of the amount within 15 days from the receipt of such notice. The notice must also include the details of the drawer, and it should specify that the cheque was presented within the validity period; it should also specify that the cheque was not given as a loan or a gift but for discharging the debt. If the drawer makes the payment after receiving the cheque bounce notice, then there is no need to file a case against the drawer. If the legal notice is not taken seriously by the drawer, then it may give rise to legal action.
  • The next step is to file a case if the drawer does not make a payment within the prescribed time. If there is no payment within 15 days by the drawer, then the drawee can file a criminal case within 30 days from the expiry of the cheque bounce notice period. The case can be filed only in the city where the drawer presented the cheque to the drawee.
  • After this, the court will issue summons under section 138 of the Negotiable Instrument Act 1881. Once the summons is issued, the drawer will have to appear before the court for resolving the case.
  • If the drawer is found guilty, then the penal provision mentioned under section 138 of the Negotiable Instrument Act 1881, will be applied by the Court.


It is also punishable with imprisonment or a fine mentioned under section 138 of the Negotiable Instruments Act 1881. The term of imprisonment may extend up to two years, and the fine may extend to twice the amount of the cheque drawn or both. In case if the cheque is drawn in favour of a charitable trust or as an application amount of shares, then it is exempted from the cheque bounce notice. Section 143A of the Negotiable Instruments Act 1881 states the provision relating to the Interim compensation to the drawee for the inconvenience that has been caused due to the cheque dishonour. Hence, cheque bounce is one of the common problems which is still prevalent in India. It is highly advisable to appoint a professional to draft a cheque bounce notice, or legal consequences may be attracted.

Author: Shivam Bansal,
Symbiosis law School, Noida - 2nd Year


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