Knowing Common Reasons behind Cheque Bounce in India

What is Cheque Bounce

A cheque bounce occurs when the cheque returns back from the bank, marking it as dishonoured. Not only does this create an obstacle in the entire process of financial transaction, but the issuer may even be held liable legally due to this issue, by virtue of Section 138 of the Negotiable Instruments Act of 1881.

This might bring in front various other major issues such as loss of credibility, straining of the business relationship, and even, worst, fine and imprisonment to the person issuing the cheque. Legal complexities may thus demand involvement with a cheque bounce attorney.

Some common causes for the cheque bounce are:

• Bank Account Closed: It is mostly due to the insufficient balance in the bank account of the cheque issuer to the amount of cheque. The cheque will bounce unpaid back to the bank, causing hassle to the payee.
• Signature Mismatch: The cause of cheque returns arises when there is a difference in the signature of the cheque issued by the issuer and the signed record with the bank. Banking institutions strictly crosscheck the signature and legitimacy before they allow any amount of payment.
• Overwriting or Alterations: Cheques that are bearing overwriting or correction or any form of noticeable overwriting are likely to bounce. Banks have strong regulations against processing altered documents that might eventually bounce off the cheque.
• Incorrect Date or Expired Cheque: A cheque that bears incorrect date or post-dated date or pre-dated date gets dishonored. In addition, cheques issued more than three months from the date issued are considered invalid.
• Account Closure or Dormancy: If the account of the issuer is closed, frozen, or dormant, then any cheque issued from such an account will be dishonored. This often happens because of prolonged inactivity or legal actions against the account holder.
• Mismatched Amounts: If the numbers and words do not tally, then the cheque will be refused. Writing cheques accurately depicts that if it is filled in correctly then the cheque will be accepted.
• Stop Payment Advice: If on a stop payment advice of a cheque, then the presented cheque will be sent back to the bank unprocessed. This may result in disputes and litigations if action was considered redundant.
• Banking Mistakes: Sometimes, it might occur from the bank's side as well, as sometimes the errors in technology or during the time of processing occur. It occurs very rarely and has to be dealt with that.

Legal Consequences of Cheque Bounce in India

According to the Negotiable Instruments Act, 1881, Section 138, it is held as an offense in the country's law. On bouncing a cheque, the drawer of the cheque can file a case against the drawee for demanding a notice for the payment of the amount.

Steps involved in a cheque bounce case are:

• Legal Notice: In case a cheque bounce memo is received by the bank, then within 30 days, a legal notice is issued to the drawee.
• Filing of a case: If the drawer doesn't respond or pays an amount in the notice given within 15 days then a criminal complaint is lodged against the drawer.
• Court proceedings: Imprisonment or punishment is provided to the drawer.

Get lawyer advice while hiring cheque bounce lawyer will guide through proper procedures with safeguard of the legal rights at the tail end.

How to Prevent Cheque Bouncing

• Balance Reconciliation: Maintain good balance in the account at the time of issuance otherwise chances of bouncing would arrive since money has been extracted.
• Verification Confirmation: All dates must be in the order and amount along with its signatories in order so that the number of chowks will be declined for errors.
• Communication: Educate the payee to issue cheques of amount regarding clear clarity over the remittance from his side of the parties.
• Do Not Overwrite: Draw cheques with carefulness and try not to correct or overlap.
• Follow Up On Stop Payments: If any stop payment is requested, brief the payee about it so that the person will not be getting misunderstandings.

Role of Cheque Bounce Lawyer

Cheque bounce lawyer plays an essential role in dealing with cheque bounce cases. He supports the both parties involved in cheque bouncing i.e., payee and the issuer by:

• Sending and drafting legal notices.
• Presenting cases in courts.
• Suggesting settlement options in case long litigation is involved.
• He ensures that legal procedures are followed within legal timelines.

Whether you are a payee looking to recover or an issuer looking to defend a case, professional lawyers can make the entire process easier and protect your interests.

Protection for Business

Cheque bounce incidents are more dangerous to businesses as they affect the cash flow and relationships with clients and vendors.

• Using digital payment systems reduces dependency on cheques.
• Keep bank details updated and let the clients know about their payments.
• The contracts must clearly state terms of payments so that disputes arise about less matters.
• There must be account managers who can effectively and very easily manage accounts and records.

Technology and Future of Payments

Financial technology continues to gradually replace cheque-based transactions with digital payment platforms and real time transfers. More security and quicker processing make it less susceptible to error scope, making most people and businesses attracted to these channels.

The use of cheques holds good in a few instances like high value transactions and bonds. One has to use such instruments correctly and with utmost care for the prevention of dishonour.

Cheque bounce cases in India are sounding a caution call in a financial transaction. Though it is there with the solutions in the laws, they are like Negotiable Instruments Act, it is reduced by awareness and preventive action.

It is possible that the knowledge of cheque bounce or dishonor and seeking timely assistance from a lawyer may save the time of individuals and businesses affected in disputes. Even if digital payment methods are there to eliminate cheques, legal and financial implications of cheques would continue to attract attention in India's financial world.

Staying informed and adopting best practices can help navigate the challenges associated with cheque bounce and maintain healthy financial relationships.