Cheque is the most common mode of making the payment. The other valid reasons for a cheque dishonour is that the account on which the cheque has been issued is closed or a stop payment instruction has been given by the drawer of the cheque to the bank. Today i am going to discuss the reasons for dishonour of cheque. When the drawer has closed his account prior to the presentation of cheque. If court orders or a military government decrees that some peoples account be frozen, the.
A cheque is a bill of exchange drawn on a specified banker. However, apart from the above reasons, a banker is bound to dishonour a cheque for the following additional reasons. Dishonour of cheque its consequences under negotiable. Frequent dishonour of cheques amount above 1 crore.
How to invest in the stock market for beginners duration. Guidelines of supreme court for trial of dishonour of. If the bank refuses to make payment of amount then cheque is said to be dishonoured. The payee can prosecute the drawer of the cheque only when the cheque has been issued towards the discharge of liability or debt by the drawer. According to section 8, where any cheque drawn by a person on an account maintained by him is returned by the bank unpaid for reasons mentioned in said section such person shall be deemed to have committed an offence. Definition the negotiable instruments act, 1881 makes the dishonour of cheques a criminal offence. Dishonour of cheque may be of two kindsby non acceptance. When the drawee of the bill of exchange commit default in making the payment of the bill on maturity to the drawer, it is said to be dishonoured of a bill of exchange by nonpayment. Guidelines for dealing with incidents of frequent dishonour of cheques of value 1 crore and above i. It is payable immediately on demand, without any days of grace.
With a view to enforcing financial discipline among the customers, should there be instances of dishonour of a cheque for an amount equal to rupees one crore and above on four occasions during the financial year for want of. A pdf version of the format can be downloaded from the link given below for free. The payee has an option to resubmit the cheque within three months of the date specified on the cheque after fulfilling the reason for the dishonour of cheque. Possible reasons why the bill is dishonoured by nonpayment. Dishonour of cheque its consequences under negotiable instruments act as amended upto when a cheque is presented in the concerned bank by the drawee within the stipulated time, within the three months from the date of issue the drawee bank issue check return memo to the payee mentioning the reason for non payment. Dishonor of cheque and reasons for dishonor accounting.
When cheque is presented for payment, the bank should make the payment to the payee as mentioned in the cheque if everything is in order. It is used for making payments without any need to carry cash. It is also noteworthy that section 8 while making dishonour of a cheque an offence punishable with imprisonment and fine, also provides for safeguards to protect drawers of such instruments where dishonour may take place for reasons other than those arising out of dishonest intentions. When a cheque is dishonoured, the drawee bank immediately issues a cheque return memo to the banker of the payee mentioning the reason for nonpayment. Cheque bounce or cheque dishonour mandatory legal process i. Section 8 makes dishonour of cheque in certain cases an offence. If the drawer has no sufficient fund or money in his or her. Cheque dishonour archives supreme court of india judgements. In order to duly protect the interest of its payee, holder in due course, there is an attempt to. When the cheque signed by the drawer is presented for the payment to the drawee bank and such payment is not made as the maker, acceptor, or drawee make any default, it is called dishonour of cheque.
Moreover, the payee has to give a notice to the drawer within 30 days from the date of receiving cheque return memo from the bank. Section 6 of negotiable instruments act defines cheque as. In order to duly protect the interest of its payee, holder in due course, there is an attempt to discourage dishonour of a cheque by making it an offence. In the first situation suppose you are having an account in sbi and you gave a cheque from your sbi account to somebody, who deposited the cheque in hisher bank and sbi returned the cheque. If the amount of cheque is paid by the bank to the payee, the cheque is said to be honored. Then if cheque is issued by way of gift and it gets dishonoured offence us. A dishonoured cheque is a cheque that is not credited by a bank under numerous of reasons. The holder or payee of the cheque may present the cheque for encashment on any number of occasions within the period of its validity three months from the date of issue. Cheque dishonour also called cheque bounce is a criminal offence. If the bank refuses to pay the amount of cheque, then the cheque is said to be dishonored. Dishonour of cheque is a criminal offence in india and is punishable by law with imprisonment up to two years or with the monetary penalty or with both. It is seen that once the cheque has been drawn and issued to the payee and the payee has presented the cheque and thereafter, if any instructions are issued to the bank for nonpayment and the cheque is returned to the payee with such an endorsement, it amounts to dishonour of cheque and it comes within the meaning of section 8. Section 8 of nia provides that the dishonour of the cheques.
Dishonour of cheques legally, the author of the cheque is called drawer, the person in whose favour, the cheque is drawn is called payee, and the bank who is directed to pay the amount is known as drawee. On each presentation of the cheque and its dishonour, a fresh right and not cause of action accrues. This article on dishonour of cheque section 8 of the negotiable instruments act gives a comprehensive overview about all aspects of cheque bouncing and cheque dishonour as per laws in india. If the cheque is being dishonored again, the payee has the right to prosecute the drawer legally for the dishonour of the cheque. Cheque bouncing dishonour of cheque explained in hindi duration. If the bank for a valid reason refuses to make the payment of a cross cheque, this cheque is called as a dishonored cheque. Cheque dishonour dishonour of chequeoffence by companycompany not arraigned as an accusedhigh court was wrong in observing that the company can. Reasons may be such as insufficient funds in the account, signature mismatch etc. Dishonour of cheques a cheque is one form of a bill of exchange. And hence this article would deal with what is dishonour of cheque and dishonoured cheque reasons. A dishonored cheque is a cheque that is not credited by the bank for numerous reasons including. What are the various reasons for dishonor of cheques. There are number of reasons of dishonor of cheque and without any valid reason, bank never refused to make payment.
Have you come across a situation where your cheque has been dishonoured. Bank return the cheque to payee with a memo in which reason of dishonour is written. Cheque returns what can you do to recover your money. A dishonour, whether based on a second or any successive presentation of a cheque for encashment, would be a dishonour within the meaning of section 8, msr leathers v. One popular and common reason why cheque is dishonoured. Dishonour of a cheque and legal recourse ipleaders. If one is judged by a law court to be unable to pay his debts in full, the bank will dishonour any check presented on behalf of that customer. What are the reasons for a cheque being dishonoured. Section 8 of the negotiable instruments act, 1881 mentions the punishment for cheque bounce cases in india. There could be many reasons for dishonour of cheque. Dishonouring of a bank cheque punjab judicial academy. A cheque is an order written by a drawer to a banker to pay on demand a specific sum of money to the parson or persons named as payee on the cheque. These reasons stand as valid grounds for action against the drawer of the cheque.
This video talks about some of the common mistakes and statutory reasons for cheque dishonour. In this video you will know about 5 reasons for dishonour of cheque. The said cheque was presented within its validity period and stood dishonoured on presentation. If you want to take legal action than you have to follow these steps first. Complaint against cheque dishonour a sample form this is a form of complaint against cheque dishonour. Dishonor of cheque and reasons for dishonor dishonor of cheque the bank should pay the amount mentioned on the cheque as soon as it is presented. Also remember these reasons while writing a cheque next time to avoid dishonour of your cheque by bank in future.
If your cheque is dishonoured due to any reason you are in trouble at the outset, i wish to make it clear that i wont go into the details pertaining to section 8 of the negotiable instruments act ni act which comes into play whenever is a cheque is dishonoured. The holder or payee can resubmit the cheque within three months of the date on it, if. If your cheque is dishonoured due to any reason you are. With a view to enforce financial discipline among the customers, bank has introduced a condition for operation of accounts with cheque facility that in the event of dishonour of a cheque valuing rupees one crore and above drawn on a. Cutting short, most of the business community knows what is a cheque and a current account and what they dont know or confused about is what to do when a cheque get returned, cheque returns are very common and there can be various reasons, lets look at the possible reasons and what you can do about it. Dishonored cheque means a cheque that was submitteddeposited for payment was rejected and no money was paid.
Legal notice for cheque dishonour is very important for taking legal action under section 8 of ni act of bangladesh. Dishonour of cheques meaning and judicial remery kps legal. It is the duty of the bank to honor the cheque of his clients if complete or valid in all respects. For dishonour of one cheque there can be only one offence and such offence is committed by the drawer immediately on his failure to make the payment within 15 days of the receipt of the notice served. The payees banker then gives the dishonoured cheque and the memo to the payee. Advantages objectives importance cause of popularity. Issuance of a cheque towards repayment of a loan or fulfillment of an obligation was primarily a civil matter object of s. A cheque contains a mandate of the drawer to pay some specific amount of money. The law only takes cognizance of the fact that the payment has not been forthcoming and it matters little that any of the manifold reasons may have caused that situation38. While, if the bank refuses to pay the amount to the payee, the cheque is said to be. Upon dishonour of a cheque, the bank on which the cheque is.