Reason For the Cheque Bounced

One of the most frequent financial crimes in India is the bouncing of cheques. Cheques are processed in our nation in significant numbers roughly 6 lakhs every day.

There are a lot of court cases in India that include cheque bounce offenses that are still unresolved but can be bank cheque bounces. Yes, a cheque is considered to have bounced if the issuer writes one that is invalid for any technical reason, such as a mismatched signature or overwriting, or if there is insufficient money in the account as a result of the bank not processing it. The Cheque is then disregarded or returned unpaid.

Therefore, the memo states that the Payee can resubmit the Cheque for clearing and stated the "cheque bounce reasons list" as the reason the Cheque was returned. One must be aware of Indian laws governing cheque bounce to get an idea of what you should do after the cheque is bounced.

There can be various reasons why Cheques bounce reasons, so when does a cheque bounce let's understand:

The cheque bounces due to insufficient balance.

Lack of cash in the account is one of the most frequent causes of Cheque dishonoring. The bank would not be able to complete the transaction if you had issued a cheque linked to the account with less money than what is indicated on the Cheque.

The payment would be stopped due to the insufficient balance, and the bank would return the Cheque, stating the Cheque bounced due to insufficient balance

Penalties may result for both the issuer and the Payee in this situation. When this occurs, the issuer has two options: they can write a fresh cheque while ensuring their account has enough money.

If the receiver chooses, he may also file a lawsuit against the issuer for failing to honor the Cheque, which could have dire repercussions. As a result, you should take care while writing a cheque and check your balance.

Cheque Bounce due to signature mismatch

Nowadays, most individuals use digital banking, and cheques are one of the few financial products that still require a signature. Despite this, it is quite significant because it is a fundamental component of cheques.

If the issuer's signature does not match one of the bank's exemplar signatures, the bank will never accept the Cheque. Several people signed when they opened an account in their bank four to five years ago, but they need help remembering what they signed. Always remember that a signature is essential when issuing a cheque because it is a standard error that causes the Cheque to bounce.

Cheque Bounce Due to Overwriting

The handwriting is frequently illegible and unclear, and the drawer may have made corrections, overwritten the name, amount, etc., or both. These could cause a cheque to be dishonored, which would need to be rewritten as a new cheque or returned. The bank will not accept a cheque overwritten, corrected, or otherwise altered. If you need to make any modifications for whatever reason, always write a new cheque to avoid having the old one returned.

Cheque Bounced Due To Stop Payment

The drawer may ask their bank to use a stop payment so the Cheque won't be cleared. For instance, the purchased items are defective. Therefore payment is not required, or payment has already been completed using another digital method. The Cheque is returned to the Payee with this note in the cheque return memo if the drawer has applied a stop-payment, in which case the Cheque is not paid. This occurs when the drawer requests that the bank halt the Cheque and not process the payment; in this case, the Cheque would bounce, and the Payee would not be reimbursed for the amount specified on the Cheque.

Cheque Bounce Due To The Account Being Blocked/Freeze

The Cheque may have occasionally been written on an outdated, dormant bank account. Additionally, given proper instructions, banks and courts may freeze an account. Such cheques will not be paid and will be returned or bounced. This phrase may be new to you, but it also plays a significant role in cheque-dishonored situations. This occurs when a person's account must be frozen due to a court or government order. In cases like this, the bank will deny any cheques issued in that person's name.

Cheque bounce due to Torn, Ripped, or Damaged Cheque

Cheques that are ripped, damaged, or otherwise not in excellent condition are not accepted by the bank. Additionally, if the Cheque's details are unclear, it will be dishonored.

Additionally, if the Cheque has too many stains for any reason, the bank may reject it, thus it is essential for you to carefully store the Cheque to prevent it from being voided.

Cheque bounces due to incorrect Data

Sometimes the inaccuracy of the data filled in the cheque book such as:

Date of Cheque:

The date is usually a problem because it might be misspelled, unreadable, have a mistake, or be scribbled; if any of these things are on your Cheque, it could cause it to be dishonored. The bank would be forced to reject it if the date was flexible. Another factor that can cause a cheque to bounce is when the expiration date has passed. The Supreme Court has ruled that a cheque cannot be cashed after three months. Let's use an example to understand this better: If the issuer writes the date 15/5/2022 on the Cheque, the Cheque is only good until 14/8/2022.

The difference in the number of words and numbers:

Your Cheque would bounce if the amount you wrote were incorrect, as indicated by the discrepancy between the words and figures. Additionally, the bank would not accept your Cheque if there were words or numbers in the words portion.

For instance, you might write only 15,000 words in the words portion but 1,50,000 in the area of the figure. Because of the significant disparity, the bank would not honor your Cheque.

Using numbers in word columns is the following scenario; even if you enter the same amount, the bank will still reject it. For instance, if you write 15,000 in the numbers portion and 15,000 in the words section, it will still be disregarded.

Post-Dated Cheque

The Cheque is returned unpaid if the date on it is not up to date. For instance, a person receives a cheque on January 10, 2022, with the payment date listed as January 31, 2022. This Cheque is post-dated, not current-dated; therefore if it is presented on January 28, 2022, it will be considered dishonored. On January 31, 2022, the same Cheque can be submitted and successfully cleared. Sometimes people need to correct the date and put the date as January 31 21, rather than January 30, 22. Such a cheque is returned since it is past due.

The account is inactive or frozen

The Cheque may have occasionally been written on an outdated, dormant bank account. Additionally, given proper instructions, banks and courts may freeze an account. Cheques drawn on such accounts are returned or bounced and are not paid.

About The Author:

Adv. Rohit Singh, Managing Partner at PSK Legal Associates, is a seasoned commercial lawyer with a stellar reputation. With years of legal experience, he advises prominent clients across industries like education, IT, banking, pharmaceuticals, and more. His expertise spans Civil & Criminal Law, Corporate Law, Property Law, ADR, and Banking Law. Formerly in-house counsel at Reliance Capital, he later worked with the Former Advocate General of Punjab. His strategic legal insights have significantly benefited corporate clients, especially in complex corporate matters.