How to Write a Cancelled Cheque?
In India, cancelled cheques are a typical occurrence. The full definition of this financial word is as follows: Simply put, a cancelled cheque is one that has been returned to the bank for some reason.
For example, the account might not have enough money in it, or the bank might have made a mistake that rendered the cheque invalid.
Banks typically won’t accept cancelled cheques that are older than a specific amount of time after they were issued. For instance, within 6–8 weeks of the date of issuance, the majority of banks typically return cancelled cheques.
If you’ve gotten a cancelled cheque, you should absolutely get in touch with your bank to see why it was returned and to see what you can do to get a new one issued. If cancelled cheques are not swiftly retrieved, they may cause some major financial issues.
A business or an individual may issue a cancelled cheque.
How should a cancelled cheque be properly written?
Even though there aren’t many intricacies to drafting a cancelled cheque, there are a few things to keep in mind. Before delivering a voided cheque to a bank or NBFC, abide by the following rules:
-> Take a fresh cheque. (Don’t write anything else on the cheque, like the payee’s name, the amount, your signature, etc.)
-> Two parallel lines should be drawn across the cheque.
-> In between the two parallel lines, write “CANCELLED” in all capital letters.
-> Verify that no important details, such as the account number, Indian Financial System Code (IFSC) code, magnetic ink character recognition (MICR) code, account holder’s name, bank’s name, or address, are obscured by the parallel lines.
When do you require a cancelled cheque in India?
If you are owed money by someone else and have not yet received it, you often need a cancelled cheque. Cheques that have been cashed can also be used as collateral for loans.
How to check if your cheque has been cancelled or not?
If a cheque you got in the mail has not yet been cashed, it likely has been cancelled. In India, cancelled cheques can imply a variety of problems, but the most frequent cause is that the bank did not receive the funds that were meant to be put on the cheque.
You should get in touch with your bank right away if you have any concerns about the reason your cheque was cancelled or if you believe it might have been done accidentally.
What is a bounced cheque?
A cancelled cheque is referred to as a “bounced cheque” in India. A cheque that has been returned to the bank as unpaid is known as a bounced cheque.
This can happen for a variety of reasons, including the person who wrote the cheque not having enough money in their account to cover it, the bank not being able to process the cheque because it’s invalid, or the person who wrote the cheque not having the correct banking details. Even the bounced cheques are termed as fallen or cancelled cheques by the banks.
If you think you may have received a bounced cheque, you should contact your bank immediately. Your bank will likely require proof of ownership of the cheque in order to process it, so make sure you have all of your documentation handy when you call. If your bank doesn’t eventually recover the money from the person who wrote the bounced cheque, they may charge you for the costs associated with processing it.
Cancelled cheques in India
There are a few different ways that a cancelled cheque can affect you as an individual. For example, if you’re owed money by a company and they issue you a cancelled cheque, you may have difficulty getting your money back. However, if you’ve been issued a cheque that’s been returned as undeliverable, that doesn’t mean your bank will refuse to honour it – in fact, most banks will simply re-issue the same cheque with a new number.
If you’re wondering what to do if you receive a cancelled cheque in India, it’s best to contact your bank as soon as possible. They’ll be able to tell you more about how to go about getting your money back and whether or not there are any other steps you need to take.
Why is a cancelled cheque so important in India?
When you write a cheque, you are essentially assuring the person or business that you are writing the cheque to that you will return the funds that are specified on the cheque. You will receive a cancelled cheque if you don’t keep your word. Depending on the basis for cancellation, cancelled cheques in India may result in a variety of outcomes. This could result in a bounced cheque from the relevant banks.
In general, your credit score will be impacted if your bank cancels your cheque because you haven’t paid your debt. Additionally, if the banking institution where you deposited the cheque decides to cancel it because you haven’t paid your expenses, this could have a negative impact on your credit score.
What causes a cheque to be returned unpaid?
The cheque is said to have cleared if the bank gives the payee the amount shown on the cheque. Dishonoured cheques, however, are ones that the bank declines to honour or pay out. A fine is issued after notifying both the issuer and the recipient of the occurrence.
In the event that a cheque is returned because of insufficient funds, the drawer bank sends a return note to the payee bank. A notification and a returned cheque from the payee’s bank come next.
Fortunately, the payee has three months from the time they closed the reason for the cheque’s rejection to resubmit the cheque. The payee shall provide the drawer with notice of the return within 30 days after receiving a return memo from the bank. According to the notification, the payee will get the money within 15 days of receiving the note from the drawer.
If a defalcator does not pay within 30 days of getting notice of the defalcation, legal action may be initiated against them. If the cheque is for a sizable sum of money, a criminal investigation may be required. You must comprehend what a dishonoured cheque entails.
You are bouncing a cheque, which carries serious consequences for the issuer and is one of the most common crimes in India. You must be aware of the importance of a bounced cheque and the components of a cheque in order to avoid having your statement rejected.
Almost all transactions involve the use of cheques, including the repayment of loans, the payment of wages, the payment of bills, and the payment of fees, to name a few. The vast majority of cheques are handled and cleared by banks each day. The goal of writing a cheque is to show that money has been paid. Despite this, lots of people still take reviews as payment. In order to prevent misuse, crossed “Account Payee Only”cheques should always be issued.
Cheques are a type of negotiating instrument. A crossed-and-account-payee bill cannot be negotiated by anybody other than the payee. The review monies must be deposited into the account of the intended recipient. The bank that has been given the order to pay the money is referred to as the “drawee,” not the “drawer,” of the cheque.
Even though this might be the case, cheque bounces are happening increasingly frequently these days. Large cheques may get returned by the bank that issued them because they weren’t cashed.
What if a bank refuses to accept acheque?
The drawer’s bank sends a cheque return memo to the payee’s bank to inform it of a bounced cheque. As a courtesy, bankers frequently deliver a bounced cheque and an accompanying message to their clients. Within three months of the cheque’s date, the bearer or payee may resubmit the bill if they are convinced that it will be honoured a second time.
The cheque recipient has the right to file a lawsuit against the drawer if the cheque issuer refuses to pay.If the money on the cheque is used to settle a debt or other obligation the defaulter owes the payee, only then may the payee pursue a dishonoured cheque in court. If the cheque was presented as a gift, used as a loan, or for any other unlawful activity, the drawer could be held accountable.
Suing in a court of law
Cheque dishonouring circumstances are governed under the Negotiable Instruments Act of 1881. This law has undergone numerous amendments since it was first introduced in 1881. According to Section 138, a dishonoured cheque can result in up to two years in prison, a monetary fine, or both penalties. If the recipient chooses to take drawers to court, drawers must be offered an option.
Such an opportunity must be presented in writing. Within 30 days of receiving the “cheque return memo” from the bank, a communication must be sent to the drawer. The information should explain that they must do so in order to guarantee that the payee receives their money within 15 days of getting notice. If a fresh payment is due within 30 days of receiving notice from the cheque issuer, a complaint under Section 138 of the Instruments of Bargaining Act may be made.
But it’s vital to remember that a magistrate’s court complaint must be submitted within a month of the notice period’s expiration. In this situation, it is crucial to seek the counsel of a lawyer who is knowledgeable about and talented in this area of law.
Penalties and sanctions
Following receipt of the complaint, affidavit, and supporting documents, the court may issue a summons and hold a hearing.
Those found guilty of defaulting may face fines up to twice the amount of the cheque, up to two years in prison, or both. The bank has the right to restrict or deny a customer access to their checking account if they have a pattern of failing inspections.
When a cheque is paid within 15 days of the day on which notice was received, the drawer does not break the law. If the payee does not take such action within one month of the day on which the 15-day notice period expires, a complaint may be brought in the jurisdictional magistrate’s court.
What leads to cheques that are not honoured?
- A financial institution won’t accept a cheque if the signature is missing or inconsistent.
- If the payee’s name is unclear or not present, the payment will be cancelled.
- The numbers and the words don’t add up
- Whenever the account number is omitted entirely or without explicit mention
- To prevent a cheque from being cashed, a drawer must instruct their bank to take that action.
- Even if a judge has ordered it, banks cannot cash a cheque.
- The drawer might have closed the account before delivering the cash.
- If not enough funds are available in your account to cover the cheque’s payment
- The bank will respond appropriately if it learns that the drawer has passed away, gone insane, or filed for bankruptcy.
- If the drawer doesn’t sign to acknowledge that the cheque has been amended, the review is null and void.
- If the date is not stated or is spelled incorrectly, it is three months old.
A step-by-step guide for legal action if your chequeis dishonoured
A cheque may be used for payments such as loan repayment, wage payments, bills, fees, etc. Every day, banks process and clear the majority of cheques. A statement is used as the method of payment. However, for the majority of people, leaving a review is a safe and secure payment option.
To prevent misuse, it is strongly suggested that the cheque be crossed “Account Payee Only.” The second of these two negotiable instruments, account payee cheques, cannot be negotiated by anyone who accepts the payee. The issued cheques must be deposited into the payee’s bank account.
According to the law, a cheque’s “payee” is referred to as the “paying bank”, and its “drawer” is referred to as the “drawee”. In recent years, cheque bounce cases have multiplied dramatically. If there are significant outstanding balances, payee banks may return dishonoured cheques.
The reason for a cheque’s non-payment is stated in an instant chequereturn memo that is delivered to the recipient’s bank.
The memo and a returned cheque are given to the payee by their bank. Within three months of the cheque’s date, either the drawer or the payee may reissue the issued statement if they are satisfied that it will be honoured a second time.
The payee has the option to file a lawsuit against the drawer if the cheque issuer refuses to pay, though. For dishonouring the cheque, the payee may take legal action against the defaulter/drawer. No exceptions to this rule are allowed, save in exceptional circumstances where the payment is made to settle a debt or even a defaulter’s obligations to the payee. Even if a gift cheque is used to guarantee a loan or for illegal purposes, the drawer is not subject to punishment.
Court proceedings were initiated
If payees choose to take legal action against the payment, they should be given the choice to do so in court. The only thing that should be necessary as a precaution is a written notification. Within a month of receiving the bank’s Cheque Return Memo notification, the notice must be delivered to the drawer.
The notice should also state that the payee must receive payment of the cheque’s amount within a week of the issuer receiving it. If the cheque issuer is unable to pay within a month of receiving the notice, the payee may pursue criminal charges under Section 138 of the Contract Act.
What triggers the bounce of a cheque?
The main causes of a cheque bounce are as follows:
You have no funds in your account
The absence of a balance in your account is one of the main causes for a cheque to bounce. An individual must have enough money in their account to write a cheque. However, the cheque is returned if your account has no balance at all.
The bank account doesn’t have enough money
Another factor is that, in accordance with Section 138 of the Negotiable Instrument Act of 1881, there are insufficient funds in the person’s bank account. According to the same, if the person has money in their account but is still able to write a cheque in their name, your cheque will bounce quickly.
One must be cautious and avoid making any mistakes when conducting financial transactions. Additionally, while writing a cheque in your name, make sure to write all the facts clearly and accurately. If you make a mistake, your cheque may bounce. Examples of mistakes include a mismatched signature, an erroneous date, an incorrect account number, etc.
The account gets closed right before or after writing the cheque
The closing of the person’s account just before or after drawing the cheque is a very serious issue. Be careful not to purposely or accidentally close your account before or after drawing the cheque. This is because doing so could result in your cheque bouncing.
The amount of the cheque payment exceeds the predetermined amount
The last and most important reason for a cheque to bounce is when more money is paid with it than is allowed. The person simply needs to withdraw the maximum amount for each transaction. The amount of a cheque payment is also not an exemption. Cheques might bounce if the person exceeds the predetermined maximum payment amount by cheque. These are the explanations for why a cheque may bounce in India.
If a cheque bounces, what should you do?
We now know the typical cause of cheque bounces. But what happens in India if your cheque bounces? One of the most significant questions we all have is this one. We’ll also have a detailed understanding of how cheque bounces affect India.
The banks will impose a significant penalty cost
The most frequent result of a bounced cheque is that the individual is assessed a substantial penalty by the banks. The banks impose a significant penalty fee on the person once they have determined the reason why the cheque bounced. Furthermore, the price tag may exceed their lifetime earnings.
The payee may file a lawsuit to protect their rights
To protect their rights in circumstances when a cheque fails, the payee whom the person intends to write the cheque for may file a lawsuit against the cheque’s drawer.
Charges for cheque bounce penalties must be paid by the cheque drawer
If it is determined that the person was responsible for a bounced cheque, they will be subject to further penalty fines as well as significant bank fees. Additionally, this may cause your investments to become worthless.
The cheque drawer’s reputation in society has been damaged
When a person’s cheque bounces, it can have a lasting negative impact on not only his personal life but also his social life and reputation. People will continue to perceive them as criminals no matter what they say or do in the future.
A bounced cheque puts the payee in financial jeopardy
The payee placing themselves in financial peril as a result of the bouncedchequeis the final and most serious repercussion. The payee may have a financial crisis as a result of bounced cheque, much like the person who suffers as a result of the bounced cheque.
Therefore, these are the repercussions that a bounced cheque in India has for both the individual and the payee.
Notice of cheque bounce
The payee can immediately serve the person with a legal notice once they obtain the cheque bounce memo from the payee’s bank. The exact sum at issue in the case as well as any prior debt related to it should be included in the draught of the legal notice. In addition, the drawee shall have 15 days to correct their errors. If they don’t do the same within 15 days, moreover,on the 16th day, the legal notice action starts.
As a result, the payee must give notice to the drawee and give them 15 days as soon as they learn about the drawee’s bank’s bounce memo. In this manner, the payee may guarantee that the drawee won’t commit the same mistake again.
Can a bounced cheque be deposited in India?
Can you deposit a bounced cheque again? Everyone is curious about the solution to this. Yes, if the drawee has technical difficulties such as an inadequate balance, a payment limit that has been exceeded, a signature problem, etc.
The payee has the option of requesting payment with a different cheque or using the same cheque to pay you by raising your account balance.
Therefore, the drawee can deposit the same cheque again at the bank in the event of small technical issues. Or get a new cheque to correct your real mistakes.
What should I do if the cheque bounces?
There are numerous actions you might take if the cheque is returned unpaid. These are what they are:
To start, get the memo from the payee bank that explains why the cheque bounced
In the event that the payee learns of the bounced cheque, they should obtain the memo from the drawee bank that details the cause.
Secondly, confirm the reason behind the cheque bounce.
Third, get in touch with the drawee if there are any minor errors.
Next, be sure to get in touch with the payee if there are any minor issues with the bounced cheque.
Finally, allow the drawee to modify the errors within 15 days.
You might have recently received a cancelled cheque in the mail if you’re like many Indians. In that case, you might be curious as to what this is and why it’s such a huge deal. In India, cancelled cheques are actually a legal disaster that can have severe repercussions for both the conned party and the bank that was duped. It is advised to be fully conversant with the concept of a cancelled cheque in order to be on the safe side.