Dishonour of Cheque

What is Cheque Bounce/Dishonour of Cheque

Cheque bounce or dishonour of cheque occurs when the cheque that is presented to the bank for payment, is returned back either due to insufficient funds in the drawer’s account or the signature on the cheque does not match with the drawer’s signature or any other reason. In India, cheque bounce is considered a legal offence and the law regulating the offence is section 138 of the Negotiable Instrument Act, 1881.

Reasons for Cheque Bounce

Following are some of the reasons why a cheque is bounced or dishonoured:

1. Insufficient funds in the account of the person issuing the cheque
2. Unmatching signature on the cheque
3. Post dated cheque i.e. the date mentioned on the cheque is yet to come
4. Stale cheque i.e. the cheque is presented to the bank 3 months after the cheque was issued
5. When the payment is stopped- if the drawer asks the bank to stop the payment and not to pay for cheque already issued
6. Difference in amount in words and number
7. Disfigured or Damaged cheque- a cheque will be dishonoured if it is torn, damaged or not in a good condition or has some details not clearly visible

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