CHEQUE BOUNCE LAW
According to Section 138 of the Act, the dishonour of cheque is a criminal offence and is punishable by imprisonment up to two years or with monetary penalty or with both. If payee decides to proceed legally, then the drawer should be given a chance of repaying the cheque amount immediately.
Cheque bounce, in fact, is one of the most common financial offences in India that can lead to disastrous consequences for the issuer. Here is a look at the various ways in which a bounced cheque can affect you:
Penalty by the bank: If your cheque happens to bounce due to insufficient funds or any other technical reason like signature mismatch, both the defaulter and the payee are charged by their respective banks. If the bounced cheque is against the repayment of any loan, you would have to additionally bear the late payment charges (which vary from Rs 200 to Rs 700) along with the penalty fee charges by the bank.
“The penalty charges for cheque outward return are close to Rs 300 for most banks, while charges for cheque inward return are about Rs 100. The exact penalty charges vary with banks and are different for different account types.
Negative Impact on your CIBIL score: A bounced cheque can dent your financial credit history. Even a single bounce can impact your CIBIL score irreparably to such an extent that you can possibly be denied a loan in the future. The best way to keep your CIBIL score healthy is to make sure your cheques are never dishonored and that there would be at least a few thousands more than the minimum balance for your account even after the cheque is encashed.
Filling of civil and criminal charges by the aggrieved party: If you are lucky, you can get away with only a small fine paid to the bank for a bounced cheque. On the other hand, if your stars are aligned against you, the aggrieved party that does not receive the promised funds can file a civil or criminal case against you as an issuer of the cheque.
Other Risks: As per the RBI guidelines, banks can stop issuing cheque book facilities to any customer booked for repeated cheque bounce offence at least four times on cheques valued at over Rs 1 crore. If you have kept any collateral security with the bank for any loan and if repayment EMI cheque bounces, the banks are well within their right to issue a legal notice or deduct money from your account.
No need to say that always make sure that all the cheques issued by you are honored on time. If you happen to exhaust the money in your account before the cheque date, inform the payee about it through writing and issue stop payment / cancellation at your bank, or infuse sufficient funds into your account before the date of the cheque. Also, do not issue a non-account payee cheque or a cheque without crossing it in order to avoid the bouncing of cheque.
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