When a cheque is dishonored or "bounces," it means that the cheque was not honored by the bank upon presentation due to various reasons such as insufficient funds, account closure, mismatched signature, post-dated cheque, or a stale-dated cheque.
Cheque bounce is a legal matter and can have financial implications for both the issuer of the cheque (drawer) and the payee (person to whom the cheque was issued).
In India, a cheque bounce or dishonor is governed by the provisions of the Negotiable Instruments Act, 1881.
The bank will typically notify the payee or holder of the cheque about the dishonored cheque, providing details of the reason for the bounce.
The payee or holder of the cheque can inform the issuer (drawer) about the dishonored cheque, either directly or by sending a cheque bounce notice. The notice serves as a formal communication informing the drawer about the dishonored cheque and demanding payment.
The dishonor of a cheque is governed by Section 138 of The Negotiable Instruments Act, 1881 (in India). The Act provides legal remedies and procedures to address cheque bounce cases. The specific provisions may vary in different jurisdictions.
If the drawer fails to make the payment within the stipulated time mentioned in the cheque bounce notice, the payee or holder of the cheque can initiate legal action.
The consequences for cheque bounce vary depending on the jurisdiction and the amount involved. It may include penalties, fines, imprisonment, and damage to the issuer's credit reputation.
