Remedies for Cheque Bounce and Dishonored Cheque:

Negotiable Instruments Act, 1881 is an act to define and amend the law relating to Promissory Notes, Bills of Exchange and Cheques. Cheque is a bill of exchange which carries a prescribed amount and it is issued to entity or individual for payments.

The maker or issuer of cheque is called the “drawer”, and the person to whom the payment is being done is know as "payee". The drawer issues a cheque to payee for payment which can be withdrawn by the payee.

If the bank declines to honor the cheque then it is know as Dishonoured Cheque and Cheque Bounce. A bank may decline to honor the cheque if there is insufficient funds, Crossing limit of overdraft, missing of information such as date, signature, mismatch of word numbers and expiry. As a confirmation regards to the reason for non-payment, The drawee bank issues a ‘Cheque Return Memo’ to the payee’s bank mentioning the reason . In turn, the payee’s bank handovers the bounced cheque and the memo to the payee.

As per the Sec 138 of the act, if a cheque is dishonoured by the bank due to insufficient funds in the account of the drawer then it is criminal offense. And the drawer can be punished with imprisonment for term which may be extended to two years or with fine with may extend to twice the amount of cheque or with both.

Provided that nothing contained in this section shall apply unless—

(a) the cheque has been presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier;

(b) the payee or the holder in due course of the cheque, as the case may be, makes a demand for the payment of the said amount of money by giving a notice; in writing, to the drawer of the cheque, within thirty days of the receipt of information by him from the bank regarding the return of the cheque as unpaid; and

(c) the drawer of such cheque fails to make the payment of the said amount of money to the payee or, as the case may be, to the holder in due course of the cheque, within fifteen days of the receipt of the said notice.

Apart from the above conditions, The drawer cannot be sued in such cases in which the cheque was handed out as a gift or to lend a loan to the payee or for unlawful purposes.

As of 2020, there is a proposal from government to decriminlaise the criminal offence and make it a civil offence, The central government has sought suggestions and objections from the public regards to the move.

Although this has met with a mixed response from SMB's and traders who aren't in favor as if there is a failure in payment from the larger corporations the act would had act up as a remedy with a criminal offence. Larger corporation have welcomed the move saying it will help in ease of doing business.

Source: Mixed response to govt plan to decriminalise cheque bounce, https://mumbaimirror.indiatimes.com/mumbai/other/mixed-response-to-govt-plan-to-decriminalise-cheque-bounce/articleshow/76364361.cms Bounced Cheques: A Commercial Problem Needs A Commercial Solution, https://www.bloombergquint.com/opinion/bounced-cheques-a-commercial-problem-needs-a-commercial-solution