What is Dishonour of Cheque?

What is Dishonour of Cheque?

When a cheque is brought to the bank for payment and the bank declines to process it, this is known as Dishonour of Cheque. Several, factors, including insufficient cash in the account, a signature that doesn’t match, an overdrawn account, or a post-dated cheque, may result in this rejection. A dishonored cheque indicates that insufficient money or other problems are preventing the transaction for which the cheque was issued from being executed. A dishonored cheque is regarded as a criminal offense in many places and the person who issues it could face legal repercussions....

Types of Cheques

1. Bearer Cheque: This cheque is payable to the bearer and is cashable at any time upon presentation. It is important to note here that it must be signed. Bearer cheques are very risky and in case, such cheques are misplaced it can lead to a loss of the amount mentioned in the cheque....

Section 138 of the Negotiable Instruments Act, 1881

Section 138 of the Negotiable Instruments Act, 1881 in India relates to the offence of Dishonor of a Cheque for shortage of cash or if it exceeds the amount stipulated to be paid by the drawer’s account. The section describes the punishments and legal consequences for those committing these crimes....

Essential for an Action under Section 138

1. Cheque Dishonor: A cheque dishonored for insufficient funds or for more than what is scheduled to be deposited into the drawer’s account is a violation of Section 138. The provisions here do not cover the dishonor of other negotiable instruments....

Why do Cheques get Dishonoured?

1. Insufficient Funds: The most common cause of dishonor of a cheque is a lack of funds in the drawer’s account that exceeds the amount on the cheque....

Legal Implications in Cheque Bounce Cases

1. Notice of Content: A demand for payment within fifteen days of receipt of the notification, along with information about the type of dishonor committed and the associated amount, should all be included in the notice....

Penalties in Cheque Bounce Cases

1. Financial Penalties: If a cheque is dishonored, the bank will impose financial penalties. The drawer of the cheque is responsible for paying the maximum penalty of ₹200....

Conclusion

Thus, the involvement of penal provisions has given relief to the drawee. It has also helped in controlling the dishonest intention of doing fraud. The steps can be taken as a remarkable step in the banking sector. Getting involved in cheque bounce cases has serious legal implications, and the best way to handle it is to seek advice from legal professionals....

Frequently Asked Questions (FAQs)

1. Is it possible for someone to go to jail for a rejected cheque?...