A cheque bounce is a common financial issue that occurs when a cheque presented for payment is returned unpaid by the bank. This can happen due to insufficient funds, discrepancies in the cheque details, or other reasons. In many countries, cheque bounce is considered a legal offense, leading to penalties or even prosecution.
Reasons for Cheque Bounce
- Insufficient Funds: The most common cause of cheque bounce is the lack of adequate funds in the issuer’s account.
- Signature Mismatch: If the signature on the cheque does not match the specimen signature registered with the bank, the cheque is rejected.
- Post-Dated or Expired Cheque: A cheque presented before its date (post-dated) or after its validity period is not honored.
- Overwriting or Errors: Visible alterations or mistakes in writing can render a cheque invalid.
- Account Closure or Freeze: If the issuer’s account is closed or frozen, the cheque will bounce.
- Technical Issues: Discrepancies like mismatch in amounts (words vs. numbers) or illegible handwriting can lead to rejection.
Legal Consequences
In most jurisdictions, cheque bounce cases are governed by specific laws. For example:
- India: Section 138 of the Negotiable Instruments Act, 1881, makes cheque bounce a punishable offense with penalties, including fines or imprisonment of up to two years.