In the world of financial transactions, cheques are a common way to make payments. However, there can be situations where a cheque doesn’t go through, leading to a cheque bounce or cheque dishonor.
While these terms sound similar, there are key differences between cheque bounce and cheque dishonor that can impact your financial situation and legal options.Â
A Cheque Bounce occurs when a bank returns a cheque due to insufficient funds in the account of the person who issued the cheque. This essentially means that the drawer doesn’t have enough money in their account to cover the amount written on the cheque.
This can be a major inconvenience for the recipient ( known as the payee)Â of the cheque, who is left without the expected funds.
What is a Cheque Bounce?
A Cheque Bounce occurs when a bank returns a cheque due to insufficient funds in the account of the person who issued the cheque. This essentially means that the drawer doesn’t have enough money in their account to cover the amount written on the cheque.
This can be a major inconvenience for the recipient ( known as the payee)Â of the cheque, who is left without the expected funds.
What is a Cheque Dishonour?
A cheque dishonor is a broader term encompassing any reason a bank refuses to honor a cheque. This includes cheque bounce due to insufficient funds but also extends to other reasons like:
Other Reasons of Cheque Bounce:
- Signature Mismatch: The signature on the cheque doesn’t match the signature on file with the bank.
- Incorrect Date: The cheque is either post-dated (dated for a future date) or sale-dated ( dated too far in the past)
- Alterations or damage: The cheque has been physically altered or damaged, making it difficult for the bank to process.
- Stopped Payment: The drawer has instructed their bank to stop payment on the cheque.
- Account Closure: The drawer’s account has been closed.
- Exceeds Arrangement: The cheque amount exceeds the pre-approved credit limit on the drawer’s account.Â
Legal Actions For A Cheque Bounce And Dishonour Case
If you encounter a cheque bounce or cheque dishonor, you have legal recourse. The Negotiable Instruments Act, of 1881, particularly Section 138, makes cheque bounce a criminal offense In India. Here’s what you can do:
1. Bank Notification: Get a written statement from your bank confirming the cheque dishonor.
2. Legal Notice: Send a legal demand notice to the drawer, requesting payment of the cheque amount and any applicable penalties.
3. File a Complaint: If the drawer fails to respond to the notice, you can file a criminal complaint under section 138 of the Negotiable Instruments Act. This can lead to imprisonment for the drawer or a fine, or both.
10 Differences Between Cheque Bounce And Cheque Dishonor
Here’s a breakdown of the 10 key Differences Between Cheque Bounce and Cheque Dishonor:
1. Reason for Dishonor:
- Cheque Bounce: Insufficient funds in the drawer’s account.
- Cheque Dishonor: Broader term, can happen for various reasons besides insufficient funds (e.g., signature mismatch, stopped payment).
2. Severity in Cheque Bounce and Cheque Dishonor:
- Cheque Bounce: Generally considered more serious due to the implication of deliberate non-payment with available funds.
- Cheque Dishonor: This may not be intentional (e.g., clerical error)
3. Legal Implications:
- Cheque Bounce: This can lead to harsher penalties under the Negotiable Instruments Act.
- Cheque Dishonor: This may still have legal consequences, but penalties might be lighter.
4. Defences in Cheque Bounce and Cheque Dishonor:
- Cheque Bounce: The Drawer has limited defenses (unless a technical error).
- Cheque Dishonor: Drawer may have valid defenses depending on the reason (e.g., stopped payment).
5. Recovery Process:
- Cheque Bounce: Recovery may be faster due to clear evidence of non-payment.
- Cheque Dishonor: Recovery might take longer depending on the reason for dishonor.
6. Specificity in Cheque Bounce and Cheque Dishonor:
- Cheque Bounce: Specific term indicating dishonor due to lack of funds.
- Cheque Dishonor: General term encompassing all reasons for a rejected cheque.
7. Financial Responsibility:
- Cheque Bounce: The drawer is liable for the cheque amount and potential penalties.
- Cheque Dishonor: Liability depends on the reason for dishonor.
8. Payee Protection:
- Cheque Bounce: Provides stronger legal grounds for the payee to recover the owed amount.
- Cheque Dishonor: Protection depends on the specific reason for dishonor.
9. Legal Action:
- Cheque Bounce: Stronger case for filing a legal complaint under Section 138 of the Negotiable Instruments Act.
- Cheque Dishonor: Legal action may still be possible, but the grounds might differ.
10. Burden of Proof:
- Cheque Bounce: Easier for the payee to prove the drawer’s fault (insufficient funds).
- Cheque Dishonor: The burden of proof may shift depending on the reason for dishonor (e.g., the drawer might need to prove they stopped payment).
Who Can Assist In Cheque Bounce And Cheque Dishonour Cases? Contact M&M Law Partners
Contact The Best Civil lawyers in Delhi High Court, M&M Law Partners for expert legal assistance in dealing with Cheque Bounce and Cheque Dishonor cases. Our experienced lawyers can guide you through the legal process, help you recover the owed amount, and ensure your financial rights are protected.
FAQs
1. How Did You Find Out The Cheque Had Bounced?
Your bank will usually notify you of a dishonored cheque through your bank statement, online banking, or a letter. They’ll let you know the cheque couldn’t be cleared.
2. Who Handles Cheque Dishonour Complaints/Cases?
Cheque dishonor complaints are filed in a magistrate court with a lawyer’s help. Lawyers specialize in these financial matters.
3. Who May File A Lawsuit For A Bounced Cheque?
The legal right to sue for a bounced cheque belongs to the payee, the person to whom the cheque was made payable.
4. Where Can I Submit A Cheque Bounce Case?
Cheque bounce cases are submitted in the magistrate court with jurisdiction over the place where the cheque bounced. This court can hear the case and potentially impose penalties on the drawer.
5. Can Police Take Action On Cheque Bounce?
The police aren’t typically involved in cheque bounce cases directly. However, they might assist in investigations if there’s evidence of fraud or a financial crime involved.
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