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Reasons For Dishonouring A Cheque By A Bank

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Apr 13th, 2011
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REASONS FOR DISHONOURING A CHEQUE BY A BANK
A cheque is sometime returned unpaid by the bank to the customer. The reason is usually given on the cheque or upon a slip of paper attached to it. The principal reasons for dishonoring the cheque are as follows: -

(1) A cheque is not in proper form. It does not satisfy the conditions  specified in the Negotiable Instrument Act
(2) Drawers signature s differs from specimen recorded with the bank.
(3) A cheque is stale (in circulation for more than 6 months) or post dated.
(4) Amount expressed in words and figures differ.
(5) Cheque mutilated (cut torn part of cheque missing)
(6) Material alternations (change in date, crossing, amount, name of payee etc. on cheque) need confirmation by the drawer.
(7) Order cheque not properly endorsed.
(8) Do not tally with directions contained in the crossing.

When a banker is justified in refusing payment.
A banker is justified in refusing payment of a customers cheque on the happening OT any one of the following events.

(i) Notice of the customer to refuse payment of the cheque.
(ii) Notice of the customer’s death.
(iii) Notice of the customer’s insanity
(iv) Notice of the customer’s bankruptcy.
(v) In case of a company, notice of its winding up.
(vi) Notice of a garnishee order (court order).
(vii) In case of trust accounts receipt of information that the customer contemplates a breach of trust.


Article Source: http://www.informationbible.com/article-reasons-for-dishonouring-a-cheque-by-a-bank-52388.html

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  • 1. Martintandia
    people should also try to write cheques properly
    (4:16 am, 2012.06.28)
  • 2. Anand
    My cheque is stated to be reurned with reason, "OUT OF ALLOCOATED RANGE", KINDLY ELABORATE THE RESAONS PLEASE.
    (1:56 am, 2012.04.29)
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