DISHONOUR OF A CHEQUE

DISHONOUR OF A CHEQUE
The relation between a banker and his customer is that of a debtor and a creditor. Money deposited will always belong to the customer and the bank will be bound to return its equivalent to the customer or to any person to his order. But in certain cases a banker refuses to honour his customers cheque. When the payment of the cheque is refused by the bank, it is said to be dishonoured.
REASONS FOR DISHONOUR
A cheque may be dishonoured under the following circumstances.
i. When balance to the credit of the customer is insufficient to meet the cheque.
ii. When money deposited cannot be withdrawn on demand in the case of fixed deposit.
iii. When the customer closes the account before the cheque is presented for encashment.
iv. When the cheque is not properly drawn.
v. If the cheque is crossed but presented on counter for the payment.
vi. When the cheque is post dated.
vii. If death information of the A/C holder is received.
viii. If the A/C holder is declared insolvent by the law.
ix. If the A/C holder has stopped the payment.
x. If the signature on the cheque is different with the specimen signature.
xi. If the amount written in figures is different from the amount written in words.
xii. If the cheque is presented for payment at a branch other than the one where the customer has the account.


ENDORSEMENT
The word Endorsement has been derive from the latin word ‘’Indorsum’’ which means ‘’On the back’’. Anything written or printed on the back of a deed or instruments is called endorsement. When the member or holder signs his name on the negotiable instrument for the purpose of negotiation i.e. direction to pay the amount to another person is called Endorsement. Section 15 of the Negotiable Instrument Act 1881 defines Endorsement as
When the maker or holder of a negotiable instrument sign the same, otherwise than as such maker for the purpose of negotiation on the back or face therefore on a slip of paper or so signs for the same purpose a stamp paper intended to be completed as a negotiable instrument he is said to endorse the same and he is called the endorse.
KINDS OF ENDORSEMENT
Different kinds of Endorsement are as follows.
i. Blank or General Endorsement
When the endorser simply put his signature on the back of the instrument without specifying the name of the endorsee, it is said to be general endorsement. The holder can convert it in full endorsement by writing the name of the payee above the signature of the endorsee.
ii. Special or Full Endorsement
It specifies in addition to the signature of the endorser the person to whom or to whose order the instrument is payable.
iii. Restrictive Endorsement
An endorsement which prohibited further negotiation of the instrument is called restrictive endorsement. For instance if a cheque is endorsed saying "Pay A only" or "Pay A for A/C of B" the endorsed has no power to transfer his right further.
iv. Partial Endorsement
An endorsement which makes the transfer of the instrument from the endorser to the endorsee after the fulfillment of stated conditions is called Partial Endorsement.
Sans Recourse
When a person wants to exclude his liability to the endorse or any subsequent holder in case of dishonour of the instrument. The Endorser fees himself from his liability on a negotiable instrument by writing the words SANS RECOURSE after the name of the endorsee. He should make it clean that he endorsee or the holder should not look to him for payment in case of the dishonour of the instrument. The endorsee may refuse to take an instrument with such an endorsement

CROSSING OF A CHEQUE
A Crossing is a direction to the paying banker that the cheque should be paid only is a specified banker named in crossing. A cheque is said to be crossed when it bears across it is face the transfers lines without any words on them.
Crossing prevents the cheque from being cashed by anyone except the payee. This ensures safety of payment by means of cheques. It affords security and protection to the true corner. Cheques are crossed in order to avoid losses arising from open cheques. However it does not affect the negotiability of a cheque.