Cases of cheque bounce are not uncommon these days. Payments are made by cheque for transactions be it re-payment of loan or payment of fees for business or other liabilities. These cheques bearing large amounts sometimes remain unpaid and are returned by the bank on which they are drawn. For such cases punishment is provided by Section 138 of Negotiable Instruments Act, 1881 (hereinafter the Act). Offence of dishonor of cheque as mentioned u/s. 138 of the Act is considered as a criminal offence.

Dishonour of cheque for insufficiency, etc., of funds in the account. Where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person or entity from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall, without prejudice to any other provision of this Act, be punished with imprisonment for a term which may extend to one year, or with fine which may extend to twice the amount of the cheque, or with both.