Under Section 138 of the Negotiable Instruments Act (NI Act), the penalty for cheque bounce is both monetary and criminal in nature. Here are the details: Monetary Penalty: If a cheque bounces due to insufficient funds or any other reason, the drawer of the cheque is liable to pay the payee an amount equal to the face value of the cheque, along with interest and legal costs. The interest and legal costs vary depending on the terms of the agreement between the parties, but in general, the interest rate is between 9-12% per annum and the legal costs may include fees for legal notices, court fees, and advocate fees. Criminal Penalty: The drawer of the bounced cheque is also liable to be punished with imprisonment for a term which may extend to two years, or with a fine which may extend to twice the amount of the cheque, or with both. The payee of the cheque can initiate criminal proceedings against the drawer under Section 138 of the NI Act, after issuing a legal notice demanding payment and giving the drawer an opportunity to make good on the cheque. It is important to note that the penalty for cheque bounce under Section 138 of the NI Act is in addition to any other penalties that may be applicable under other laws, such as the Indian Penal Code or the Companies Act.
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