What is a cheque bounce or dishonoured cheque?

Answer

A:

A cheque bounce or dishonoured cheque means that the bank has refused to make payment against the cheque and has returned it unpaid to the payee.

 Explanation

• When a cheque is deposited, the bank checks whether the drawer’s account has sufficient funds and whether all details are correct.

• If the bank cannot process the cheque for reasons like insufficient funds, signature mismatch, account closed, stop payment, or technical errors, it marks the cheque as dishonoured.

• The bank then issues a Cheque Return Memo to the payee stating the reason for dishonour.

 Legal View

• A cheque that bounces due to reasons like insufficient funds or account closure can attract criminal liability under Section 138 of the Negotiable Instruments Act, 1881.

• The drawer may face imprisonment up to 2 years, or fine up to twice the cheque amount, or both, unless the payment is made within 15 days of receiving a demand notice.

 A cheque bounce or dishonoured cheque is when the bank refuses to honour the cheque and returns it unpaid, usually due to lack of funds or other defects, and it may lead to legal action against the drawer.