Everything about dishonour of cheque or Cheque Bounce

Updated: Jun 4, 2020

Cheques are legal instruments used to make transactions through banks and these are the most common monetary instruments used by people. But the bank does not accept cheques under certain circumstances and return it. Reason for such action could be various. Provisions for dishonour of cheque are given under Negotiable Instruments Act, 1881.


In this article we will cover the followings :

  1. What is Cheque?

  2. Parties involved while drawing a cheque

  3. Different reasons for dishonour of cheque or bounce cheque

  4. Charges on dishonour of cheque or bounce cheque

  5. Negative CIBIL score on dishonour of cheque or bounce cheque

  6. Rights and remedies for on dishonour of cheque or bounce cheque

  7. Legal measures that can be taken by the drawee on dishonour of cheque or bounce cheque

  8. Where and how a case on dishonour of cheque can be filed

  9. Documents to be submitted while filing a case for cheque bounce

  10. Penalty for dishonour of cheque or bounce cheque

  11. Dishonour of cheque is a compoundable offence

1. What is cheque?


Cheque is a negotiable instrument that instructs any bank to make a payment of specific amount to a person's account in whose name the cheque is drawn

2. Parties involved while drawing a cheque


Drawer- The person who draws the cheque or the person from whose account the payment is made

Payee- The person in whose favour cheque is drawn or to whom payment is to be made

Drawee- The bank who is instructed to make the payment

3. Different reasons for dishonour of cheque or bounce cheque


Sometimes a bank may not accept a cheque or dishonour it on various grounds. A bank dishonours the cheque deposited by a payee due to different reasons


● Drawer’s account has insufficient funds

● Drawer’s account has been closed in the respective bank

● Drawer has instructed stop payment on the cheque

● The signature on the cheque does not match the legal signature

● Damaged cheque

● Cheque period has been expired (i.e. 3 months from date of cheque)

● Mismatch in the details prescribed under cheque

4. Charges on dishonour of cheque or bounce cheque

● A bank charges the person who deposits the cheque on dishonour of cheque not the drawer of cheque

● Bank also returns the cheque with a memo stating the reason for dishonour of cheque

● The charges for cheque bounce vary from bank to bank

5. Negative CIBIL score on dishonour of cheque or bounce cheque


It is a score used by banks to determine the credibility of a person and repayment of loan amount on time. So, a cheque bounce can affect the credibility status of an accused. He may not be able to avail loan from any banks in future

6. Rights and remedies for on dishonour of cheque or bounce cheque

· Re submission of cheque if the problem resolved from that

· Demand Notice

· Filing a civil complaint against the drawer (Will discuss in detail below)

7. Legal measures that can be taken by the drawee on dishonour of cheque or bounce cheque

● A cheque has validity of 3 months

● If the cheque gets dishonoured, the payee of the cheque should issue a notice to the drawer

● Because it may be possible that the drawer has made honest mistake and he should be given a chance to correct it

● The notice should be issued within 1 month of cheque dishonour

● Even after 15 days of legal notice, if the drawer does not reimburse the amount then a civil case can be filed by the payee

8. Where and how a case on dishonour of cheque can be filed


Provision for filing a case on dishonour of cheque is stated under section 138 of Negotiable Instruments Act. The case should be filed with either Judicial Magistrate first class or with Metropolitan Magistrate


9. Documents to be submitted while filing a case for cheque bounce

  1. The original cheque

  2. Memo issued by the bank

  3. Copy of demand notice sent to drawer

  4. Postal receipt of demand notice sent

10. Penalty for dishonour of cheque or bounce cheque

Dishonour of a cheque is a criminal offense and penalty is given to the drawer of the cheque who fails to make the reimbursement of the amount

● Imprisonment up to 2 years can be given

● Or the payee may be instructed to pay double the value of amount due

11. Dishonour of cheque is a compoundable offence

If an accused is willing to pay the due amount after the case is filed, then the case can be withdrawn by accepting the amount. It was stated under the case, Vinay Devanna Nayak VS Royt Seva Shakhari Bank.

Let us understand the Whole scenario of dishonour of cheque

For example – Tarun (drawer) draws a cheque of Rs. 10,000 on Megha. Megha (payee) deposits it in the bank but due to insufficient funds in Tarun’s account the bank dishonours it. So, she issues a written notice on Tarun instructing him to make the payment. If Tarun fails to make the payment before 15 days of issue of notice, Megha can file a civil case on Tarun. If Tarun is willing to reimburse the amount due after the case is filed, then the case can be withdrawn by accepting the reimbursement.

So under section 147 a convicted has been given a chance to correct his mistake and avoid any legal charges. The Negotiable Instruments Act focuses on compensation to the drawee not on penalising the convicted.

Frequently Asked Questions

Q. Who is liable for Bank Charges on Dishonour of Cheque?

Ans. The Payee is liable for the Bank charges on dishonour of cheque

Q. Whose CIBIL Score would be impacted due to dishonour of cheque?

Ans. Drawer CIBIL score would be negatively impacted

Q. What type of offence is cheque dishonour?

Ans. It is a criminal kind of offence.

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