Why Cheques Bounce: Return Memo Reasons and Which Ones Support a Case

The statutory cause

Section 138 applies where a cheque is returned unpaid because the amount standing to the credit of the account is insufficient, or because it exceeds the amount arranged to be paid from that account by an agreement with the bank.

Those are the two causes the section names. Everything else has been worked out by the courts, with varying results.

Reasons courts have brought within the section

1. Stop payment instruction: held to attract Section 138 where the underlying debt exists, on the reasoning that a drawer should not escape by instructing the bank rather than letting the cheque bounce.

2. Account closed: treated as covered, since closing the account is functionally insufficiency taken to its extreme.

3. Payment refused for want of sufficient balance in a different form, such as exceeding an overdraft arrangement.

The common thread is that the drawer's own act caused the dishonour and a legally enforceable debt existed.

Reasons that generally do not support a prosecution

These leave your civil remedy intact. The debt is still owed; it is the criminal route that is unavailable.

• Signature mismatch, where genuine rather than contrived.
• Cheque post-dated and presented early.
• Material alteration not authenticated by the drawer.
• Cheque outstation and not payable at par.
• Drawer's death or insolvency notified to the bank.

Guard the return memo

The return memo does two jobs: it records the reason, which decides your remedy, and it fixes the date from which the thirty-day notice period runs.

Obtain the original, not a photocopy, and note the date of receipt rather than the date printed on it where they differ. That receipt date is what the thirty days run from, and it is the first thing a defence will probe.

Frequently asked questions

### Does a stop-payment instruction attract Section 138?

Yes, where a legally enforceable debt existed at the time. Courts have held that a drawer cannot escape liability by instructing the bank to stop payment, since that would defeat the purpose of the provision.

### What if the cheque bounced for signature mismatch?

Section 138 generally does not apply, because the dishonour was not for insufficiency of funds. Your civil remedy for the underlying debt remains, and a deliberately altered signature may raise other issues, but the criminal route under Section 138 is doubtful.

### Can I present a bounced cheque again?

Yes, within its three-month validity. Each presentation and dishonour generates a fresh return memo and a fresh thirty-day notice window. What you cannot do is rely on an earlier memo to revive a deadline you have already missed.