Cheque bounced? Experts weigh in on fines, jail risk and credit hit

'Most cases end in settlement, not jail,' say lawyers, but ignoring the 15-day notice can trigger court action and credit damage

A bounced cheque is not merely a banking inconvenience. If ignored, it can escalate into criminal prosecution under Section 138 of the Negotiable Instruments Act, 1881. 

Jail or settlement?

 

In practice, imprisonment is rare. “Most cheque bounce cases don’t end with people going to jail. Courts see a very large number of matters getting resolved once the drawer clears the dues within the 15-day window,” says Prateek Jha, advocate, Supreme Court of India. Jail, he notes, is usually considered in repeat defaults or where there is a pattern of deliberate avoidance.

 

Yatharth Rohila, partner, Aeddhaas Legal LLP, describes these cases as “quasi-criminal”, arising from civil transactions but criminalised to ensure payment discipline. Technical lapses can lead to acquittal, he says, but strong documentary proof often results in conviction.

 

 

Priya Dhankhar, counsel, SKV Law Offices, adds that once issuance, dishonour and valid notice are established, courts generally proceed towards conviction. 

 

However, imprisonment is “extremely rare” and compensation is the usual outcome.

 

Courts become stricter where there is wilful dishonesty, repeated complaints or evasion. “Imprisonment becomes more likely when the drawer repeatedly defaults or uses delay tactics,” says Sai Teja, advocate, Delhi High Court. Vipul Jai, partner, PSL Advocates & Solicitors, adds that habitual default, high-value transactions or mala fide stop-payment instructions invite tougher scrutiny.

 

The 15-day window: Act, don’t ignore

 

Under the law, once a statutory notice is received, the drawer has 15 days to pay. Ignoring this is a common mistake.

 

“Many believe it’s just a pressure tactic,” says Jha, adding that he has seen disputes end entirely when payment was made within this window. Rohila warns that failure to reply or settle can expose the drawer to claims of up to double the cheque amount plus interest and litigation costs.

 

Dhankhar cautions that even informal admissions over WhatsApp can weaken a defence. Alay Razvi, managing partner, Accord Juris, says silence often escalates matters to summons and possible coercive steps.

 

Banking and credit impact

 

Beyond court, repeated returns can hurt financially. Jha says banks may restrict cheque facilities and flag accounts. Razvi notes that banks levy penalties of ₹500–₹1,000 per bounce and may freeze facilities after repeated incidents. 

Cheque bounces are not automatically reported to credit bureaus, Dhankhar explains. However, if linked to a loan EMI, the missed payment can lower credit scores. Rohila and Jai both stress that dishonoured EMI cheques can directly impact future loan eligibility.

 

Post-dated cheques are enforceable

 

A post-dated cheque carries full legal weight once its date arrives. “Post-dated cheques are treated at par with current date cheques,” says Dhankhar. Jai clarifies that once the date matures, dishonour can trigger Section 138 if a legally enforceable debt exists.

 

Rohila points out that there is a legal presumption that a signed cheque was issued for a valid debt. Even cheques labelled as “security” can attract liability if the underlying obligation has crystallised, adds Jai.

 

The message from experts is consistent- do not treat a bounced cheque casually. Prompt payment and documented settlement can prevent years of legal and financial strain.