Two things will take place in case you issue a cheque to someone and it gets bounced. You will need to pay a penalty. The person whom you have issued the cheque, too, will be punished by the bank where she/he presents the cheque for clearance. What's more, if your cheque towards repayment of a loan bounces, then, in addition to the penalty for the bounced cheque, (charged by both banks), you will also pay late payment charges.
Legally speaking, the solution may be simple if you don't let your cheque get bounced. Ensuring ample amount of funds in your account is necessary before you issue a cheque. Your loan repayment cheque bounces and you pay the penalty. It becomes more serious if you run multiple loans simultaneously.
Broadly speaking, neither the Reserve Bank of India nor the Indian Banks' Association (IBA) have given a definite prescription of a maximum or minimum limit for the penalty for cheque-bouncing and it depends upon the discretion of the individual banks to decide.
With rapidly increasing cost of operations and interest income from loans diminishing, banks have to raise their fees to meet expenses. When customers issue cheques, it is their responsibility to check whether the sufficient balance is available in the account or not. If the cheque bounces, the bank will not bother whether it is because the account holder is able to manage the payment or not.
If a cheque gets bounced due to insufficient funds, it becomes a criminal offence for the person who issues it. The person to whom the cheque has been issued is legally empowered to file a complaint under Section 138 of the Negotiable Instruments Act. If the cheque issuance is made in favour of a bank, then the bank is also free to adopt the same legal procedure. The punishment can be both imprisonment and the penalty. Even if the default has taken place in the case of Electronic Clearing Service, a complaint can be filed under Section 25 of the Payment and Settlement Systems Act, 2007.
On the whole, the issuance of a cheque should be taken very seriously because it harms both the parties. It creates a blot on your social image and ruins your valuable time for nothing. But when the situation becomes unavoidable and you have to confront the same, you should seek advice of a very good practicing lawyer. Discuss each and everything with him and let him handle the case.
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