Why bouncing a cheque may no longer put you in jail

Bouncing cheques is a criminal offence in India. This offence comes under Section 138 of Negotiable Instrument Act, 1881. And the consequence could be two years as well as twice the amount of the cheque. Of course, this applies when you bounce a cheque due to non sufficient funds in your account, and not really for a non-financial reason, like you forgot to mention the date or sign a cheque. But looks like things are about to change.

According to a story published in The Economic Times, today, cheque bounce offense is likely to go. The report said, “The government will soon bring an amendment in the Negotiable Instruments (NI) Act that will restrict banks from dragging a person to court for an offence like cheque bounce. All such cases, after the changes are affected, will have to be decided only through arbitration , conciliation or settlement by Lok Adalats.”

More from Investing

MSMEs are breaking the traditional convention. Look who’s funding them Scale-up your startup without an investor! Here’s how

[caption id=“attachment_839323” align=“alignleft” width=“380”] AFP[/caption]

This move comes in due to the number of cheque bounce offence pending court cases in courts pan India. In fact, another offence which has a large number of pending cases are traffic challans. In short, unless there is criminal intent associated which both cheques and traffic challans, such cases may not be taken to courts in the future. Authorities are working towards the necessary changes in laws and incorporate an alternate dispute mechanism, to ensure this happens. Read the entire Economics Times story here.

But, in December last year, the Supreme Court had ruled that in case of a cheque bounce, a mismatch of signatures will be treated on par with insufficiency of funds, “payment stopped” and “closure of account”, which are offences under Section 138 of the Negotiable Instruments Act, 1881. Read this and this.

Only time will tell what will happen in the future. But here’s what you could do to avoid bouncing your cheques:

Firstpost suggestion: We recommend that if you have to make repetitive payments (like paying insurance premiums or mutual fund SIPs) instead of signing cheques every now and then, you could set an electronic clearing service or ECS. And if possible, use electronic funds transfer service like National Electronic Funds Transfer (NEFT) or Real Time Gross Settlement service (RTGS). And you should always have enough funds in the account before writing the cheque.