Cheque dishonoring is an offence - consequences.

[vskesavan]

Sec.138 of the Negotiable Instruments Act provides most specifically that where any cheque drawn by a person on an account for payment of any amount of money for the discharge in whole or in part of any debt or other liability, is returned by the drawee bank not paid, because of the amount of money standing to the credit of that account is insufficient to honour the cheque, such person shall be deemed to have committed an offence and shall be punished with imprisonment for a term which may extend to twice the amount of the cheque or with both.

[vskesavan]

Even if the cheque is issued for security or guarantee purposes, if dishonoured, it will attract prosecution U/s.138 of NI Act. The account holder should have the sufficient amount in his account to honour the cheque on the date of issuing of the cheque itself. Even though this is not followed in today's transactions, atleast the drawer should maintain sufficient balance of cheque value on the date of cheque as precautionary measure. Further, he should give stop payment advice to the bank concerned stating all the reasons for stopping the payment.