Cheques have always been the most convenient and appreciated mode of payment in all kinds of commercial transactions. Businesses would come to a halt in case these cheques would not exist or be recognized as a bonafide method of payment in business transactions. Similarly, in cases where a cheque which has been accepted in good faith, gets bounced due to the underlying reasons for dishonour of cheque would again make the business suffer, hence losing its authenticity and trust.
WHY DOES A CHEQUE DISHONOUR OR CHEQUE BOUNCE OCCURS ?
When a Drawer is liable to pay some amount to the Payee , he draws a Cheque in the name of the Payee,who is also called the Holder of the Cheque and then deposits this Cheque in the bank where he holds an account or otherwise.
The Cheque shall be deposited on or after the date specified on the Cheque but shall not be deposited later than 30 days from the date mentioned on the Cheque, as it becomes invalid. After depositing the Cheque in the account, if the Drawee finds it not possible to pay off the amount specified in the Cheque, it sends the ‘Cheque Return Memo’ to the Payee’s banker. Payee’s banker then forwards such ‘Cheque Return Memo’ to the Payee informing him about the dishonoured cheque.
Thus, an incapacity of the Drawer to pay off the Cheque amount to the Payee on the due date or when submitted/deposited, is called as dishonour of Cheque and that cheque is called dishonoured cheque.Reasons for such dishonour of cheque involves insufficient funds, mismatched signature, wrong date or no date mentioned on the cheque, damaged cheque, overwriting etc.
Whereas, a cheque bounce is usually a term used to describe the unsuccessful processing of a dispensed cheque. One of the main reason why a cheque bounces is insufficient funds in the issuer’s bank account. When there are inadequate or no funds in the account, the cheque that has been issued is returned.
If the Drawee Bank finds out that it is not possible to pay off the Cheque amount to the Payee due to any reason, the Drawee Bank immediately issues a ‘Cheque Return Memo’ to the banker of the Payee mentioning the reason for non-payment. The Payee’s banker then gives the dishonoured cheque and the memo to the Payee.
REASONS FOR DISHONOUR OF CHEQUE OR CHEQUE BOUNCE
1.No scribbling, overwriting, correction etc. is permitted on the cheque and if a cheque is found that way, it will be Dishonoured or bounced.
2.When Signature is missing, or the signature in the cheque does not match the with bank’s sample signature.
3.In case the name of the payee is not mentioned on the cheque or not visible clearly.
4.When the amount mentioned in words and figures does not match with each other.
5.In case the account number is not written clearly or missed.
6.If Court orders drawee bank to stop payment on the provided cheque,
7.In case the drawer has closed the account before submitting the cheque by the payee.
8.In case the fund in the drawer bank account is insufficient to complete the payment of the cheque.
9.In case the drawee bank receives the information regarding the death or lunacy or insolvency of the drawer.
10.The drawer does not approve any alteration made on the cheque by giving his/her signature.
THE BASIC DIFFERENCE BETWEEN THEM
These words sound very alike but they mean different. The concept of cheque dishonoured & cheque bounce is nearly same but only difference is that cheque is dishonoured due to distinctive signatures, wrong date, the amount mentioned in the cheque is either wrong or not mentioned whereas a cheque is bounced only due to insufficient funds in drawer’ account.
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