FAQs on Bouncing of Cheque - Negotiable instruments Act(1881), Business Law

Question 1

1. What is a bounced cheque?

Accepted Answer

Ans. A bounced cheque refers to a cheque that is returned by the bank due to insufficient funds in the account of the issuer. It means that the bank refuses to honor the cheque and returns it unpaid.

Question 2

2. What legal recourse is available under the Negotiable Instruments Act (1881) for a bounced cheque?

Accepted Answer

Ans. Under the Negotiable Instruments Act (1881), the payee of a bounced cheque can take legal recourse by filing a complaint against the issuer under Section 138 of the Act. This section provides for penalties and punishment for dishonoring a cheque.

Question 3

3. Can a bounced cheque be presented for payment again?

Accepted Answer

Ans. Yes, a bounced cheque can be presented for payment again. The payee has the option to represent the cheque for clearance within a specified period of time, usually within three months from the date of receiving the cheque.

Question 4

4. Does bouncing of a cheque affect the creditworthiness of the issuer?

Accepted Answer

Ans. Yes, bouncing of a cheque can negatively impact the creditworthiness of the issuer. When a cheque bounces, it indicates that the issuer does not have sufficient funds to fulfill their financial obligations. This can raise concerns among lenders and other parties who assess the creditworthiness of the issuer.

Question 5

5. What are the consequences for the issuer of a bounced cheque under the Negotiable Instruments Act (1881)?

Accepted Answer

Ans. The consequences for the issuer of a bounced cheque under the Negotiable Instruments Act (1881) include criminal liability. If found guilty, the issuer may be punished with imprisonment for a term which may extend to two years, or with a fine which may extend to twice the amount of the cheque, or with both. Additionally, the payee may also initiate civil proceedings to recover the amount of the bounced cheque.

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