A cheque bounce (also called dishonour of cheque) occurs when a bank declines to process a cheque presented for payment. In India, issuing a cheque that bounces due to insufficient funds is a criminal offence under Section 138 of the Negotiable Instruments Act, 1881.
Common Reasons a Cheque Bounces
- Insufficient funds in the account
- Account closed or frozen
- Signature mismatch
- Overwriting or corrections on the cheque
- Cheque presented after 3 months (stale cheque)
- Mismatch between amount in words and figures
- Payment stopped by the drawer
Is Every Cheque Bounce Punishable?
No. Section 138 applies only when the cheque was issued for a legally enforceable debt or liability. If you gave a cheque as a gift, or the underlying debt is itself illegal, Section 138 does not apply. The payee must also present the cheque within 3 months of the cheque date.
Key distinction: A cheque bouncing due to "payment stopped by drawer" is treated differently — courts may look at why the payment was stopped. A cheque stopped due to a genuine dispute may not attract criminal liability.
Punishment Under Section 138
- Imprisonment up to 2 years
- Fine up to twice the cheque amount
- Or both imprisonment and fine
Defences Available to the Accused
- The cheque was not issued for a legally enforceable debt
- The cheque was a security cheque (though courts are divided on this)
- The legal notice was not received within the stipulated time
- The complaint was filed beyond the limitation period
- The cheque was obtained by force, fraud or undue influence
- The signature on the cheque is forged
Difference Between Civil and Criminal Remedy
You can pursue both simultaneously. The criminal case under Section 138 NI Act is for punishment. A civil suit for money recovery can also be filed in a civil court. The criminal case often acts as leverage to achieve a faster settlement.
Cheque Bounce Statistics in India
Cheque bounce cases constitute over 30% of all cases pending in Magistrate courts across India — making it one of the most litigated offences. The government has been pushing for faster resolution through dedicated courts and Lok Adalats for cheque bounce cases.