In financial transactions, cheques have always been a popular payment method because of their ease of use and acceptance by a large majority of people. But there are indeed situations where a cheque may be thrown out or bounced, which can cause frustration and financial harm both for the issuer and the beneficiary. To control such incidents and ensure cheques’ integrity, specific rules, and regulations are commonly referred to by the name of “Cheque Bounce Rules.
Understanding Cheque Bounce Rules in India
What is a Cheque Bounce?
A bounced cheque occurs when the bank does not recognize a payment made by cheque for different reasons, such as insufficient funds, irregularities in the signature, or even if the check is older than its expiration date.
Reasons for Cheque Bounce In India
- Insufficient Funds A significant cause of a cheque’s bounce is the absence of enough funds in the issuer’s bank account.
- Signature Mismatch: If the signature of the cheque doesn’t match the original signature on the bank, the payment is most likely to get dishonored.
- Stale Cheque Note: Banks will not accept cheques issued after the expiration time, generally three months from the date the cheque was issued.
- Account Closed The issuer’s banking account is closed before the cheque is made available to make a payment. This will cause an unpaid cheque.
- Post-Dated Cheque: The issue of a post-dated cheque not having enough funds to cover the total amount is an additional reason that can lead to dishonor.
Legal Implications of Cheque Bounce In India
1. Civil and Criminal Liability: A bounced cheque can cause criminal and civil liability for the person who issued it. The person who received the bounced cheque may begin legal action against the issuer to reimburse the money mentioned in the check.
2. Legal Notice: If there is a bounced cheque, the payer or owner of the cheque can make a formal note to the issuer requesting the payment of the check amount within a specific time.
3. Penalties: Cheque bounce is also a cause for sanctions, governed by the applicable laws. The punishment may be a financial fine or even jail time, based on the gravity of the offense.
FAQs of Cheque Bounce In India (Frequently Asked Questions)
1. What should I do if my cheque does not clear?
Suppose you notice that your check bounces; you should immediately call the issuer for information as to the cause of the bounce. If required, it is necessary; you can issue a legal notification to the issuer and demand payment of the amount on your cheque.
2. Can I be imprisoned because of a bounced cheque?
Based on the seriousness of the offense and by the law in your area, the bounce of a check can be punished with a jail sentence for the person who issued it.
3. Can post-dated checks bounce?
A post-dated check can bounce if insufficient funds are in the issuer’s account at the date stated on the cheque.
4. Can you reissue an unbounced cheque?
Yes, it is possible to make a second cheque bounce when you are sure there is adequate cash in your account at the bank.
5. How long will a payer wait to file legal action for the bounced check?
The deadline for legal action to stop bounced checks differs from state to state. Generally, it is advised to initiate action quickly after dishonoring the check.
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Prevention and Remedies
1. Maintaining Sufficient Balance
To avoid bounces on cheques to prevent bounces, the issuer must ensure that there is enough money in the bank account before deciding to issue a check.
2. Timely Presentation
The beneficiary of the cheque must show it to the bank before the expiration time to avoid being deemed invalid because it is expired.
3. Regular Signature Updates
Ensuring the bank is informed of the latest changes to signatures can aid in avoiding a mistake in verification.