Common Reasons for Cheque Bounce in India

In the current era, cheques are used in almost all transactions such as payment of salary, bills, fees, loans, etc., and are processed and cleared by banks on a day-to-day basis. The reason for these transactions to take place through cheques is to secure proof of payment. However, the vast use of the instrument has also given rise to its misuse as people issue cheques without having any money in their accounts in order to defraud others or to buy some more time to arrange the payment while also causing the cheque to bounce.

What is a Cheque and what is a Cheque Bounce?

In order to understand what a cheque bounce is, it is important to know the meaning of a cheque. A Cheque is a bill of exchange drawn upon a specified banker and is payable only on demand. Legally, the person who has issued the cheque is called a & lsquo drawer' and the person in whose favor the cheque has been issued is called a & lsquo drawee'. The following are the essential characteristics of a cheque:

1. It has to be in writing.

2. It should be drawn on bankers.

3. It contains an unconditional order to pay.

4. It must have an order to pay a certain sum.

5. It should be signed by the drawer and should be dated.

6. It is payable on demand.

7. It holds the validity of a certain time period after which it is not acceptable.

8. It may be payable to the drawer himself.

9. The banker is liable only to the drawer for the payment of cheque.

10. It does not require acceptance or a stamp.

A bounced cheque simply refers to a cheque that the bank refuses to pass or honor. The receiver and the issuer are charged with a nominal penalty when the cheque is bounced. A bounced cheque also invites legal action if the receiver wishes to, and there have been cases where dishonor of cheques of significant amounts has invited criminal charges as well. Thus, it is vital for everyone to know why a cheque can bounce.

What are the common reasons for a Cheque Bounce?

A cheque can bounce for various reasons such as insufficient funds in the account of the issuer, scribbling or overwriting on the cheque, signature not matching with bank records, etc. There are instances when the receiver may not be aware of the real reason as to why the cheque has been dishonored. However, it is crucial to know the reasons behind a cheque bounce as it may invite possible legal action against the issuer. Some of the most common reasons for a cheque bounce have been stated below:
 

1. Insufficient funds

Insufficient funds in the account of the drawer are one of the most common reasons for a cheque bounce. Under this, the cheque bounce takes place when a cheque has been issued from an account that has less amount of money than written on the cheque. The bank also levies a nominal penalty on the receiver and the depositor on such an occurrence. When such a cheque is issued and submitted for clearance in the bank, the bank is not able to find enough money to complete the transaction due to which it stops payment and the cheque is dishonored. Once a cheque has been bounced due to insufficient funds the issuer can either issue a new cheque or settle the matter with the receiver of the cheque. However, if the issue is not settled among the two, the receiver of the cheque has an option to engage a Cheque Bounce Lawyer and start legal proceedings against the issuer of the cheque for non-payment or dishonor of cheque.
 

2. Date on the cheque is incorrect or unclear

The date mentioned on the cheque is a very important factor in the clearance of a cheque and any difference or problem in the date of the cheque can cause a cheque to bounce. If the date on the cheque is disfigured or has some mistake, or is not readable or scribbled, it can cause the cheque to bounce. The cheque also bounces in case the cheque has been deposited in the bank after the expiry of a period of 3 months from the date mentioned on the cheque. This is because in India the validity of a cheque to be deposited in a bank is only 3 months from the date mentioned on the cheque. For example, if the date mentioned on the cheque is 12/02/2015, the validity of the same will be till 11/05/2015. Another issue related to the date that causes dishonor of cheques is depositing Post-dated Cheques earlier than they are due. Post-dated Cheques are the cheques issued mentioning a date that is yet to come. These cheques cannot be deposited in the bank before that date arrives. For example, if a cheque is issued on 12/02/2015 with a date mentioned on it as 12/03/2015, then the receiver of such a cheque cannot deposit the same in a bank before 12/03/2015 as it is due for payment on or after that date has arrived only.
 

3. Signature mismatch

Signature mismatch is also a very common reason for the dishonor of cheques. The signature of the issuer on the cheque and the one that is saved in the bank records are supposed to match upon verification before the money is transferred to the receiver's account. In case the signature of the issuer is not as per the bank records then the bank dishonors the cheque. Thus, a person should be very careful while signing a cheque.
 

4. Amount does not match in words and numbers

In case the amount mentioned on the cheque has any difference in the payable amount mentioned in words and in digits, then the bank will dishonor the cheque. For example, if the amount written in words is & lsquo Fifteen thousand two hundred and ninety-nine only' and the amount in the number's column is 16,000/-, the cheque will be dishonored as the amounts in both the columns do not match. A cheque bounce can also take place in this case if the section where the amount has to be mentioned in words has been mentioned in digits or if the digit section has words in it. For example, if the amount mentioned in words is '50 thousand only' and in digits, it is mentioned as '50,000/-& lsquo , the cheque will be dishonored by the bank.
 

5. Cheque is damaged or disfigured

A cheque can also be dishonored by the bank if it is damaged or torn or disfigured in any way due to which certain details on the cheque are not clearly visible.
 

6. Scribbling and Overwriting

If the bank receives a cheque written carelessly or hurriedly or contains any kind of overwriting or corrections, etc., it will be dishonored. This is why it is always recommended to issue a fresh cheque in case a mistake has been made while writing a cheque. Also, in case a cheque has been received with scribbling or overwriting, it is advisable to ask for a new cheque than using the same as it may be dishonored by the bank upon submission.

Therefore, it is always advisable to keep yourself educated about the reasons which may cause a cheque bounce. One must not take dishonor of cheque lightly as there are possible legal repercussions to the same. In case a cheque bounces, the receiver of the cheque must consult a good Cheque Bounce Lawyer and shall take appropriate legal advice for further steps to be taken.

Why do you need a lawyer for a cheque bounce case?

Cheque bounces can attract possible criminal charges. Hiring a cheque bounce lawyer to file or defend a cheque bounce case is one way you can ensure that you are on the right path in your cheque bounce journey. While the lawyer will need to gather information from you regarding the case, he or she will also take care of all the paperwork, allowing you more time to take care of your business and other priorities. An experienced attorney can give you expert advice on how to handle your cheque bounce case owing to his years of experience in handling such cases. A cheque bounce lawyer is an expert on the laws and can help you avoid significant mistakes that may cause financial or legal harm, which may require future legal proceedings to correct. A lawyer would also ensure you are directed on the right path regarding which kind of case to opt for. Thus, by hiring an attorney a person can make sure that he and his interests are protected under the law. You can also use LawRato's Free Legal Advice service to get free advice on your legal issue from expert cheque bounce lawyers.

Advocate Chikirsha Mohanty

4.0 | 2+ user ratings Greater Kailash - 1, Delhi
5 years

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