What are basic reasons for dishonor of cheque in 2023?

A cheque is the primary instrument used by banks for the settlement of payments. But sometimes due to some mistakes on cheques bank officials have to reject cheques. This is called in banking terms “CHEQUE DISHONOR”. Usually, errors on cheques like wrong date, mistakes in writing amount, signature mismatch, cheque placed without having sufficient balance, absence of corporate seal in case of institution cheque etc. are the regular reasons for dishonor of cheque but countersign by the account holder may validate the cheque for payment.

But sometimes the payer paid to the receiver by making such faults to deceit him intentionally. Like, they issued cheque in the name of the receiver for settlement of payment without having balance in his account, sometimes after issuing a cheque they mark “Stop Payment” on his account, also sometimes they make a General Diary at the police station on the ground that they lose their issued cheque and instruct banks not to pay these issued cheques.

Read Also: Is the Account payee cheque really safe? Best way to write account payee cheque.

In that case, cheque receiver have to face inconvenience in the bank. For that case, they have to take legal action against the person or institution to realise his due and they dishonor these cheques from banks and take related documents from banks for legal help.  

What is cheque dishonor? dishonored cheque meaning;

A cheque is supposed to be dishonored when the cheque is presented before the authorised bank within the validity period usually 180 days of the issue date and the cheque is not paid by the bank mentioning some fault in cheques like insufficient balance, absence or mismatch of corporate seal in case of institution cheque, signature mismatch, mismatch between the amount in written and amount in number, overwriting and so on.

General reasons for dishonor of cheque:

There are several reasons for dishonor of cheque. A cheque is placed before the authorised bank may dishonor;

01. If the amount mentioned in the cheque is not available in the account or not sufficient to pay the cheque.

02. If the cheque is not presented before the authorised bank within the validity period or presented future dated cheque. This cheque in Banking is called “Post Dated Cheque”.

03. If the account status is marked “STOP PAYMENT” or “INOPERATIVE” or “DORMANT”.

04. If the signature on the cheque didn’t match with the signature of the account holder stored in the bank.

05. If mismatch is found in the written amount (by words) with the amount mentioned in the number.

06. If the cheque is not filled up properly.

07. If the cheque is edited and that editing is not confirmed by the account holder by putting an additional signature at the place of editing.

Read Also: How to write a Bank Cheque?

For dishonor a cheque bank official to do:

If a cheque is dishonored over the counter for the earlier mentioned reason a bank official verbally informs the presenter about the reason for being dishonored but in the case of deceit or other reason the presenter can seek a dishonour memo or other document provided by bank for legal action. In that case, a banker has to follow the following;

01.  Have to collect information about cheque, presenter, beneficiary, collecting bank, paying bank etc.

02.  Collect an NID copy of the presenter if he/she is not your customer.

03.  If the presenter is your customer you may motivate him to dishonor cheque by showing account transfer. And must write cheque details on deposit slip and also store deposit slip copy for future.

04.  Must check if the security feature is presented in the cheque or cheque is filled up properly or cheque is damaged or not. Because for damaged cheque suit is not granted.

05.  Must check the account status of the presented cheque. Is there any garnishee order by the court for making stop payment or freeze of the account or account status marked stop payment by the application of the account holder?

06.  Must be cautious to put any seal before fully checking the cheque because an unnecessary seal may slack the dishonor case.

07.  Must ensure the reason for cheque dishonor. Must put the exact reason for dishonor on the dishonor memo.

08.  Must maintain a dishonor resister for further query or face court for dishonor case. dishonor resister must ensure the entry of the following data;

  • Cheque account number and name of the account holder.
  • Cheque number.
  • Date written in the cheque and presenting date.
  • Name of the presenter and his account number (if he is a customer of this bank) and contact number.
  • Amount written in cheque.
  •  Dishonor reason.
  • Dishonor date.
  • For clearing cheque; collecting bank and branch name, clearing return slip.
  • Name of the official of dishonor and sign.
  • Countersign of the Head of Branch.

Documents needed to issue notice and initiate a case for cheque dishonor:

If a dishonor of cheque goes to suit following documents and information may be required under section 138 or section 140 of the Negotiable Instrument Act, 1881.

1.      The cheque which is dishonored.

2.      Issue date of the cheque and dishonor date of the cheque.

3.      Cheque dishonour document provided by the bank such as dishonour memo.

4.      Copy of the notice and reply of that notice (if provided)

5.      Receipt of acknowledgment of the notice.

6.      Why the cheque was provided or the reason behind the transaction a written deed of this.

7.      Details of the cheque.

8.      Details of the complaint.

Punishment for cheque dishonor in Bangladesh:

To file a case of Cheque, or dishonour a person has to submit above mentioned document. Recently, on 16 September 2020, the Supreme Court Appellate Division said in a verdict of a cheque dishonor case that “A valid reason for receipt of cheque must be proven in a cheque dishonor case.” So, a written document or deed for cheque receipt must be present for filing a case of cheque.

If the court found the accused guilty, then the accused could be imprisoned up to one year or fined up to three times the amount written in the cheque or both under section 138 of the Negotiable Instrument Act, 1881.  If the accused is a company, then the procedure is to be followed in the same manner as section 138, which is mentioned under section 140 of the Negotiable Instrument Act, 1881 and in that case the responsible person shall be liable.


01. What are the conditions for Dishonour of Cheque?

a) Insufficient balance in the respective account for pays the cheque.
b) Account holder Signature is missing or mismatch.
c) In case of Transfer cheque Account number mismatch.
d) Issue with the date of the chequeMismatch in the amount written in words and numbers.
e) Disfigured or damaged cheque
f) If the amount written in cheque Crossing limit of the overdraft.
g) Scribbling, overwriting or omissions on the cheque without confirmed by the account holder by putting an additional signature at the place of editing.
h) If the Cheque validity is expired.
i) If Drawer’s account is closed or payment stopped by the drawer.
j) Account status is not normal.
k) Garnishee order on account by honorable court.
l) Deceased or insanity of the account holder.
m) If the seal of the company is missing on the cheque issued by an organization.

02. Can legal action be taken in the case of Cheque Dishonour?

For the first, to take a legal action there must be a valid reason for receipt of cheque then the legal procedure may go forward. First step is the demand notice must be sent by a lawyer within 30 days from the date you get dishonoured the cheque by the bank. This demand notice is to inform the issuer that he or she will be prosecuted if payment is not made within 15 days. This demand notice should contain the following information:
i) You presented the cheque within its period of validity.
ii) Statement of debt or legally enforceable liability.
iii) Information about the reason for the dishonour of cheque (as mentioned in the dishonor memo provided by bank).
iv) Calling upon the drawer to pay the amount due.
v) That you are giving the drawer 15 days to pay up or you will initiate legal action.

03. What is the maximum punishment in a cheque Dishonour case?

case of a cheque dishonour, If the court found the accused guilty, then he/sshe can be punished up to one-year imprisonment or fine up to thrice the amount of the cheque or both; as provided under section 138 of the Negotiable instrument act, 1881.

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