In an ideal situation, the payer’s bank transfers the funds from the payer’s account to the payee. However, there are times when the payer’s bank or the payee’s bank refuses to honour this commitment. The reasons for this ‘decline’ may vary. In such a case, the cheque bounces and is called a ‘dishonoured cheque’.

What is meant by dishonour of cheque?

In an ideal situation, the payer’s bank transfers the funds from the payer’s account to the payee. However, there are times when the payer’s bank or the payee’s bank refuses to honour this commitment. The reasons for this ‘decline’ may vary. In such a case, the cheque bounces and is called a ‘dishonoured cheque’.

What are the reasons of dishonour of cheque?

What are the possible reasons due to which a bank can dishonour a cheque?

  • Insufficient funds in the payer’s bank account.
  • Signature missing or mismatch.
  • Account number mismatch.
  • Issue with the date of the cheque.
  • Mismatch in the amount in words and numbers.
  • Disfigured or damaged cheque.
  • Crossing limit of the overdraft.

What are the types of dishonor of cheque?

Dishonour is of 2 kinds: Dishonour of bill of exchange by non-acceptance. Dishonour of promissory note, bill of exchange or cheque by non-payment.

What is dishonour of cheque Class 11?

In other words, dishonour of cheque is a condition in which the 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.

When can a cheque be Dishonoured?

2. Why are cheques dishonoured by bank? Cheques are dishonoured by the bank if there are insufficient funds, a signature mismatch, overwriting or a stale date.

What is the effect of dishonour of cheque?

According to Section 138 of the Act, “the dishonour of cheque is a criminal offence and is punishable by imprisonment up to two years or with monetary penalty or with both”. If payee decides to proceed legally, then the drawer should be given a chance of repaying the cheque amount immediately.

What is a manager’s check?

A manager’s cheque is a secure cheque that the bank issues to purchasers. Payment for the cheque can be done via cash or funds from a bank account, this guarantees acceptance of the cheque by the receiving party.

What is dishonor of negotiable instrument?

Dishonor means failure to honor a negotiable instrument. This may be by non-acceptance, when a bill of argument is accessible for receipt and this is declined or cannot be obtained or by non-payment, when the bill is presented for payment and payment is refused or cannot be obtained.

What is cheque in simple words?

A cheque is a document you can issue to your bank, directing it to pay the specified sum mentioned in digits as well as words to the person whose name is borne on the cheque. Cheques are also called negotiable instruments.

Can a dishonoured cheque be presented again?

Answer: Yes, you can present the cheque again in the bank for payment, even if it was dishonoured on the first occasion. However, it goes without saying that the cheque can be presented again in the bank only during the period of its validity. Normally, the period of validity of the cheque is 3 months.

When date written on cheque is yet to come is called?

post-dated cheque
So, the difference between a stale cheque and a post-dated cheque lies in the date mentioned on the cheque, i.e. if the date borne by cheque is yet to come, then it is called as a post-dated cheque, whereas stale cheque is a cheque which is not presented for payment within three months of the date, it bears.

What is the meaning of dishonour of cheque?

In laymen terms, dishonour of cheque refers to a scenario in which the Bank refuses to dispense the amount of cheque to the payee. In the scenario of dishonour of cheque, the drawee bank promptly issues ‘Cheque Return Memo’ to the beneficiary banker, manifesting the reasons that trigger the scenario of cheque bounce.

Can a Bank refuse to pay a dishonored cheque?

There are several reasons for the dishonor of the cheque and without any valid reason, the bank never refused to make payment. If the bank for a valid reason refuses to make the payment of a cross cheque, this cheque is called a “Dishonored Cheque”.

What is the criminal liability of drawer in case of dishonour of cheque?

The criminal liability of a drawer in case of dishonour of cheque is dealt in section 138 to Section 142 of Negotiable Instrument Act 1881. The maximum punishment for such an offence is imprisonment upto 2 years or fine upto twice the amount of cheque or both.

What is the meaning of cheque?

What is a cheque? According to Section 6 of the Negotiable Instruments Act, 1881, A “cheque” is a bill of exchange drawn on a specific banker and not expressed to be payable otherwise than on demand and it includes the electronic image of a truncated cheque and cheque in the electronic form. What is dishonour of a cheque?