Have you come across a situation where your cheque has been dishonoured?
Today I am going to discuss the reasons for dishonour of cheque.
A cheque is said to be honoured, if the banks gives the amount to the payee. While, if the bank refuses to pay the amount to the payee, the cheque is said to be dishonoured. In other words, dishonour of cheque is a condition in which bank refuses to pay the amount of cheque to the payee.
Whenever the cheque is dishonoured, the drawee bank instantly issues a ‘Cheque Return Memo’ to the payee banker specifying the reasons for dishonour. The payee banker provides the memo and the dishonoured cheque to the payee. The payee has an option to resubmit the cheque within three months of the date specified on the cheque after fulfilling the reason for the dishonour of cheque.
Moreover, the payee has to give a notice to the drawer within 30 days from the date of receiving “Cheque Return Memo” from the bank. The notice should state that the cheque amount will be paid to the payee within 15 days from the date of receipt of the notice by the drawer.
However, if the drawer fails to make a fresh payment within 30 days of receiving the notice, the payee has the right to conduct a legal proceeding against the defaulter as per Section 138 of the Negotiable Instruments Act.
Here are the reasons for dishonour of cheque-
- If the cheque is overwritten
- If the signature is absent or the signature in the cheque does not match with the specimen signature kept by the bank.
- If the name of the payee is absent or not clearly written.
- If the amount written in words and figures does not match with each other.
- If the account number is not mentioned clearly or is altogether absent.
- If the drawer orders the bank to stop payment on the cheque.
- If the court of law has given order to the bank to stop payment on the cheque.
- If the drawer has closed the account before presenting the cheque.
- If the fund in the bank account is insufficient to meet the payment on the cheque.
- If the bank receives the information regarding the death or lunacy or insolvency of the drawer.
- If any alteration made on the cheque is not proved by the drawer by giving his/her signature.
- If the date is not mentioned or written incorrectly or the date mentioned is of three months before.
The Negotiable Instrument Act, 1881 is applicable for the cases related to dishonour of cheques. In accordance with section 138 of this act, dishonour of cheque is a criminal offence and is punishable with monetary penalty or imprisonment up to 2 years or both.
Keep the above points in mind while writing the cheque so that the cheque is not dishonoured.