Cheque bounce is one of the most common and serious financial offences in India that can be unpropitious for the issuer, who can face any or all of the following adversities:
Penalty by the bank:
Most of the banks charge penalty to both the issuer and the payee and in some cases even late payment charges are also levied.
Negative Impact on your CIBIL score:
A bounced cheque can impact CIBIL score adversely and it can be a foundation of unhealthy financial history of the issuer.
Filling of civil and criminal charges by the aggrieved party:
"If the cheque dishonour is wilful, the defaulter can be prosecuted under Section 138 of Negotiable Instruments Act, 1881 or Sec 417 and 420 of the Indian Penal Code (IPC) 1960.
Under Section 138, the defaulter can be punished with a prison term of two years and/or a fine as high as twice the cheque amount.
Under Sec 417 and 420 IPC, a non-bailable immediate warrant can be issued. However, in both the cases, a case of cheating has to be proven.
If more than 1 cheque is bounced, the payee can file separate suits against each dishonoured cheque, which can compound issues for the defaulter.
The payee has to follow the legal process.
He can re-present the returned cheque within 3 months from the date of the cheque, giving a second chance to the issuer. If it is returned the second time too, then he can go the legal way within 30 days of the receipt of Cheque Return Memo. Other Risks:
Banks can stop issuing cheque book facilities to defaulters.
In case a repayment EMI cheque bounces, the banks are well within their right to attach the security.
Legal route cannot be adopted if the issued cheque is against a donation or gift.