If you are taking cheque bounce very lightly, you must know that the Cheque bounce is now a criminal, offense in India. There are numerous reasons which cause Cheque Bounce and all of them are discussed below in detail. One must avoid cheque bounce causes, as it can be a dangerous thing.
A bounced cheque is the cheque which is returned by the bank due to having a fault in it. The bounced cheque invites several complications and leads to the legal mess. Therefore, here we have compiled the cheque bounce reasons in a list, pay a glance.
Lack of funds:
The most common reason which occurred in most of the cheque bounce cases is; insufficient amount of funds in the account of Drawee. In order to complete the transaction of money written over the cheque, the account must contain the sufficient funds or else the cheque will be dishonored. The cheque bounce leads to the legal tug-of-war between both the parties i.e. Drawee and Payee. To resolve the matter, either the Drawee settle by providing a new cheque by accepting the fault or else fight the case in the courtroom and accept what the court decides in the case. For intentional mistake, the court can announce the imprisonment of two years, a penalty of twice the due amount, or both. But first, a notice of 30 days is sent to the Drawee to settle the matter by paying the debt. So, before issuing a cheque always make a check on your bank balance and deposit the amount it there are no sufficient funds available.
Incorrect date on the cheque:
The filing date is considered as a most important step while issuing a cheque as it makes a large difference, if not written properly. The problem with date mentioned over the cheque can cause the dishonor of the cheque by the bank. A most common issue with the date is the disfigured date, scribbled writing or unreadable fonts. Apart from the flawed writing, the expired date mentioned on the cheque can lead to the cheque bounce scenario. Usually, the cheque is valid up to 3 months from the date it has been issued. For an example, if 30/01/2019 is the date mentioned on the cheque, it will be valid till 30/04/2019. So, if the expired cheque is offered to the bank, the dishonoring of the cheque is guaranteed. The expired cheques are also known as stale cheque, so one must submit the cheque to the bank before it expires.
The next case is the PDC cheque which stands for Post Dated Cheques. Such cheques are an issue earlier than their due period. Let’s take an example; if you have issued a PDC of 23/09/19, and the payee deposits the cheque before the date mentioned over the cheque, the cheque will not be considered by the bank and the bank will declare it as a bounced cheque.
Another important element of a cheque is the signature of the Drawee. If the signature on the cheque doesn’t match the signature you provided in the bank records, the bank will not accept the cheque and dishonor the cheque. So, it is very important to sign the cheque with great care to avoid the cheque-bounce.
If the bank records contain your full name but on the cheque, you have used any other style while signing it, the cheque will be bounced.
Numeric value differs from words:
There are two columns to fill the amount, one is to fill the amount in numeric form while another is used to fill the same amount in words, but if both of the entries do not match, the cheque will not be accepted by the bank. This is one of most common causes of cheque bounce.
If we take an example, there is twelve thousand is written in words while as in numbers “13000” is mentioned, the cheque will be declined or dishonored by the respective bank. So make sure the value matches in both forms.
If the cheque offered to the bank is torn, disfigured or damaged physically, or the value written over it are not clearly visible, such type of cheque will not be approved and will be bounced. So, it is important to keep the cheque in the best condition and store carefully.
Overwriting on cheque:
Most of us know the fact that overwriting on the cheque will lead it to disapproval. This the most common thing which most of the banks instruct their users about. Any sort of overwriting, correction, or scribbling on the cheque can cause the cheque bounce. So, make sure to write correct information at once to avoid the dishonor of cheque by the bank.
What happens when a cheque is bounced?
As per Section 138 of the Negotiable Instrument Act 1881, on dishonor of the cheque, the payee can sue the Drawee to the court as cheque-bounce is now a criminal offense in India. This has the punishment of two years of imprisonment or a huge monetary penalty. In severe cases, both the punishment can be given. So, make sure you check the values few times before providing it to the payee.
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