Cheque Bounce and Section 138 NI Act: Detailed Legal Analysis with Recent Case Law
Cheque Bounce and Section 138 NI Act: Detailed Legal Analysis with Recent Case Law By Abhishek Jat, Advocate, Gwalior High Court What is Cheque Bounce? A cheque bounce, or dishonour of cheque, happens when a cheque presented to the bank is returned unpaid. The most common reason is insufficient funds in the account, but other grounds include mismatched signatures, overwriting, stale or post-dated cheques, or stop-payment instructions. Cheque bounce disrupts financial reliability and can have serious legal consequences for the drawer, especially under Indian law. Legal Framework: Section 138 of the Negotiable Instruments Act Section 138 of the Negotiable Instruments Act, 1881, criminalizes the act of issuing a cheque that is dishonoured for insufficient funds or if it exceeds the arrangement with the bank. The law aims to ensure the credibility of cheque transactions and penalize those who issue cheques without maintaining adequate funds. The penalty can include imprisonment up to two ...