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    Cheque Bounce

    When a cheque is returned by the bank unpaid, it's said to be dishonored or bounced. Cheque bounce could occur because of several reasons just like the insufficiency of funds, etc. When the cheque is bounced for the first time, the bank issues a ‘cheque return memo’ in conjunction with reasons for non-payment.


    Main reason of Cheque Bounce:

    1. Signature isn't matching

    2. There is overwriting within the cheque

    3. The cheque was presented after the lapse of three months, i.e. after the cheque has expired

    4. Account was closed

    5. Insufficient funds within the account

    6. Payment stopped by the account holder

    7. Opening balance insufficient

    8. The disparity within the words and figures mentioned on the cheque

    9. In case the cheque is issued by an

    10. organization, the same doesn't bear the seal of the company

    11. Mismatch within the account number

    12. In case of a joint account where both signatures are required, only one sign is there

    13. Death of the customer

    14. Insolvency of the customer

    15. The insanity of the customer

    16. Crossed cheque

    17. When a cheque is issued against the principles of the trust

    18. Alteration in cheque

    19. Doubt within the genuineness of the cheque

    20. Presented at the wrong branch

    21. Crossing limit of overdraft (OD)


    What happen if cheque is bounce?

    As per the Negotiable Instruments Act, 1881, if a cheque is dishonored by the bank because of insufficient money within the bank account of the drawer then it is a criminal offense. In such a case, the drawee bank issues a ‘Cheque Return Memo’ to the payee’s bank mentioning the rationale for non-payment. In turn, the payee’s bank handovers the bounced cheque and thus the memo to the payee.

    Now the payee has the choice to either re-present the cheque within three months from the date mentioned thereon or legally prosecute the drawer. If the payee proceeds with the previous choice and if even the second time, the drawer fails to make the payment then the payee has the right to sue the drawer. However, the payee can use the drawer as long because the quantity mentioned on the dishonored cheque is to pay off a debt or the opposite liability of the drawer towards the payee. The drawer cannot be sued in such cases during which the cheque was handed out as a gift or to lend a loan to the payee or for unlawful purposes.