If you follow these tips, your check will not bounce. Otherwise, you may face jail time and fines. It’s essential to understand why checks bounce, the common reasons, preventive measures, and the steps to take if a check bounces. Let’s explore the precautions needed to avoid legal trouble.
Online transactions are becoming increasingly popular today, with many people using UPI and net banking to transfer money easily.
However, checks are still commonly used for making large transactions. It’s crucial to remember certain things when making payments by check. If a check you issue bounces, you should act quickly. You must do so to avoid being in jail.
Despite the rise of digital transactions, checks remain a vital and reliable payment method. Both traders and individuals often use them for official documentation.
However, caution is necessary when filling out a check. Errors or carelessness can lead to a bounced check.
In banking terminology, a bounced check is called a “dishonored check.” According to Section 138 of the Negotiable Instruments Act of 1881, issuing a bouncing check is considered an offense.
The issuer may face fines, imprisonment, or both if this offense is proven. There are several reasons why a check may bounce:
- The issuer needs more funds in their account.
- The cheque may bounce due to a mismatch in signatures.
- Errors in filling out the check or providing incorrect account details can also cause it to bounce.
- Changes to the check’s issuance date or issuing expired checks are additional reasons for bouncing.
Legal action does not take place immediately after a check bounces. Typically, the bank informs the issuer of the problem by sending a notice, allowing them to correct the error.
The issuer can issue another check within three months. If this second check also bounces, the payer may take legal action.
Banks impose penalties for each bounced check, with fees ranging from ₹150 to ₹800, depending on the bank and the reason for the bounce.
The bank also sends a memo to the issuer explaining why the check bounced. This notice must be addressed within 15 days.
If there is no response, the payee can file a complaint in the magistrate’s court. The check issuer could face up to two years of imprisonment, fines, or both if convicted.
To avoid trouble:
- Check your account balance before issuing a check.
- Double-check the total amount, date, signature, and account details.
- Ensure that you only issue checks that are not expired. If a check bounces, resolve the issue immediately to help avoid legal consequences.