Reasons for Cheque Bounce:
A cheque can be bounced due to following reasons.
- Insufficient Funds: Not enough funds in the drawer’s account to make the payment.
- Different Signature: The signature of the drawer is absent or unclear or does not match with the one in the Bank’s data or records.
- Account Number: The account number is missing on the cheque or not mentioned in an eligible or readable form.
- Amount: The amount provided in the words and figures do not matched.
- Overwriting / Cutting: Signature, or amount or other statements have been overwritten or cutting in the cheque.
- Name: The name of the payee is not mentioned clearly or as has been mentioned in the account details with the bank.
- Alterations: Any alterations are done on the cheque that has not been proved or verified by the signature of the payee/drawer.
- The non-existence of the account or non-existence of the account holder: If the account has been closed by the drawer before the presentation of the cheque or if the bank receives information regarding death, lunacy, or insolvency of the payer/drawer.
- Order by the drawer or court: If the drawer orders the bank to stop the payment of the cheque or the court orders the bank to stop the said payment.
Consequences of the Cheque Bounce
Penalty imposed by Bank: The bank imposes a penalty in the form of NSF (non-sufficient fee) in case of a cheque bounces due to insufficient funds in the account of drawer, mismatch of signatures or any other technical issue. The penalty imposed by Bank varies depending upon the type of bank account. Further, if the dishonored cheque is for the repayment then the bank imposes a penalty plus the late payment fees in case of the delay in the payment.
Reduction in CIBIL Score: A CIBIL score carries a three-digit number ranging from 300 to 900 used by the banks and other non-banking financial companies and institutions to determine the person’s financial credibility to repay the loan amount on time. The cheque bounce can be reason a negative impact on the CIBIL score of the accused and might create an issue while obtaining a loan from the other bank in future.
Defaulter by RBI: The RBI (Reserve Bank of India) has issued guidelines to authorize the banks to stop issuing cheque books to defaulters who have been accused of dishonor of cheques for a minimum of four numbers of times for an amount exceeding Rs. 1 crore.
Demand Notice or the Cheque Bounce Notice
If the cheque presented in the Bank is bounced or dishonored, the demand notice for the same is to be delivered to the payee within 30 days from the date of cheque bounce. This notice provides 15 days times to the drawer to deposit the required amount into the bank account or settle the dispute between both the parties. If the drawer fails to comply with the demand notice within 15 days, then a complaint is required to file the case under Section 138 of the NI Act in the magistrate court having jurisdiction for the same.
Where to file a Cheque Bounce Notice?
The proceedings of the cheque dishonor case will be initiated as per the provisions of the summary trial contained in the Code of the Criminal Procedure (CrPC), 1973. If the cause of action has been arises in metropolitan cities then the case shall be tried by a Metropolitan magistrate and for other cities, the case shall be tried by a Judicial Magistrate.
The complaint in a cheque bounce case can be initiated either at the place where the payee’s bank is located or the place where the bank of the drawer.
Further the complainant (payee) has to pay a standard amount of court fees depending on the amount of the dishonored cheque or State. The court fees vary from case to case and depend upon different cheque amounts and State.