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138 CHEQUE BOUNCE/DISHONOURED CHEQUE

WHAT IS CHEQUE BOUNCE?

Dishonour of cheque occurs when a cheque presented in a bank returns unpaid. Cheque bounce may happen due to several reasons including insufficient funds, discrepancy with the signature, amount, name of payee, instances of overwriting etc.

 

When a cheque is ‘bounced’, the relevant bank issues a ‘Cheque Return Memo’ along with reasons for non-payment.

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Who is a Drawer?

A drawer is a person who writes a cheque in favor of someone.

Who is a Drawer?

A drawer is a person who writes a cheque in favor of someone.

Who is a Drawee
or a Payee?

A drawee or payee is a person in whose favor the cheque is written.

Who is a Drawee
or a Payee?

A drawee or payee is a person in whose favor the cheque is written.

REASONS FOR CHEQUE BOUNCE

  • Insufficient funds

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  • Incorrect date

​

  • Signature mismatch

​

  • If payment is stopped

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  • Mismatch of the amount and/or figures

​

  • Overwriting

​

  • Stale cheque

​

PROCEDURE TO BE FOLLOWED

01

A notice has to be sent within 30 days

of the intimation of the check as ‘unpaid’ and receipt of the ‘Cheque Return Memo’.

02

Legal notice shall give a period of 15 days for making the payment of the amount of the dishonoured cheque.

03

If no payment is made within 15 days of the receipt of the notice of dishonor of cheque, criminal proceedings may start against the Drawer, punishment of which may include imprisonment for a term which may be extended to two years, or with fine which may extend to twice the amount of the cheque, or both.

FAQ's

A

Q

What is Cheque Bounce/Dishonour of Cheque?
The Drawer’s failure to pay the Payee’s cheque balance due to any reason on the
due date or when the payee’s banker submits it, is known as dishonour of cheque.

Q

When does the cheque become invalid or stale?

A

A cheque shall be deposited on or after the date specified on the cheque, but not
later than 3 months from the specified date, failing which the cheque shall
become invalid or ‘stale’.

Q

What is the penalty for cheque bounce?

A

As per Section 138 of Negotiable Instrument Act, 1881, dishonor of cheque is a
criminal offence which may attract punishment of imprisonment for a term which
may be extended to two years, or with fine which may extend to twice the
amount of the cheque, or with both.

Q

What is the validity of cheque?

A

A cheque is deemed valid for a period of three months from the date when it is
drawn.

Q

What is ‘Cheque Return Memo’?

A

When a cheque is dishonoured, a ‘Cheque Return Memo’ is offered by the bank to
the payee explaining the reason(s) why the cheque was bounced.

Q

What are the documents required for registering a complaint?

A

Following documents are required for registering a complaint for the same:

1. Original cheque
2. Original ‘Cheque Return Memo’
3. Legal notice for demand sent to the drawer & the acknowledgement receipts
4. Bank Statement
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