A dishonored cheque is a cheque that the bank on which is drawn declines to pay (“honor”). There are a number of reasons why a bank would refuse to honor a cheque, with insufficient funds being the most common cause., The holder of the cheque can file a complaint under Section 138 of the Negotiable Instrument Act, 1881 against the drawer of the cheque and can also file a civil case for recovery. Firstly the holder of the cheque has to send a demand notice to the drawer of the cheque within 30 days, after receiving such information from the bank, asking the drawer to make the payment of the cheque amount within 15 days from the receipt demand notice. If the drawer fails to make the payment within 15 days from the receipt of the notice with respect to the dishonor of the cheque, the beneficiary of the cheque can file a complaint before the Learned Magistrate having jurisdiction to entertain such complaint. Getting a cheque bounced or dishonored is considered a criminal offense, punishable by fines and/or jail term, under Section 138 of the N.I Act. The drawer/signatory of the cheque can be punished with imprisonment for a term that may extend to two years, with a fine that may extend to twice the amount of the cheque or both.
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