What is dishonour of cheque

A dishonour of cheque, commonly known as a cheque bounce, occurs when a bank refuses to process a cheque and returns it unpaid to the payee. This typically happens for several reasons:

• Insufficient funds in the drawer's account to cover the cheque amount.
• Signature mismatch between the cheque and bank records.
• The account being closed or frozen.
• The cheque being stale (older than three months) or post-dated.

In India, dishonouring a cheque due to insufficient funds is a criminal offence under Section 138 of the Negotiable Instruments Act, 1881, potentially leading to fines or imprisonment.