Cheque return reasons are the standard grounds a bank prints on the cheque return memo when it does not pay a cheque, such as "Funds insufficient", "Exceeds arrangement", "Payment stopped by drawer", "Drawer's signature differs" or "Account closed". Section 138 of the NI Act covers insufficient funds and exceeding the arrangement, and courts have held that stop payment, account closed and signature mismatch can also attract it in many cases. Technical reasons, such as stale, post-dated or "present with document", usually call for re-presentation instead.
Common return reasons and what they mean
Codes and exact wording vary slightly between banks, so read the reason text on your memo. The common ones:
| Reason on memo | What it means | Section 138? |
|---|---|---|
| Funds insufficient | Balance in the account is less than the cheque amount | Yes, squarely covered |
| Exceeds arrangement | Amount exceeds the overdraft or credit limit arranged with the bank | Yes, squarely covered |
| Payment stopped by drawer | Drawer instructed the bank not to pay | Usually yes, unless the drawer shows there was no debt or enough funds and a valid reason |
| Account closed | The drawer's account was closed before presentation | Usually yes; courts treat it as a species of insufficiency |
| Drawer's signature differs | Signature does not match bank records | Often yes, where the mismatch is deliberate or the drawer cannot show innocence |
| Drawer's signature incomplete / required | Cheque unsigned or partly signed | Courts have differed; treated as covered in some cases, especially if deliberate |
| Refer to drawer | Bank asks you to contact the drawer, often signalling lack of funds | Courts have generally treated it as covered where the underlying reason is funds |
| Alterations require drawer's authentication | Changes on the cheque are not authenticated; CTS cheques do not accept alterations other than date | Usually not; ask for a fresh cheque |
| Present with document | Bank wants the physical instrument or a supporting document | Usually not by itself; re-present as directed |
| Effects not cleared, present again | Funds deposited by the drawer are still in clearing | Usually not; re-present |
| Instrument out-dated / stale | Presented after three months from the cheque date | No |
| Instrument post-dated | Presented before the date on the cheque | No; re-present on or after the date |
| Payment stopped by attachment / account frozen | Court or authority has blocked the account | Depends on facts; take advice |
What to do with each kind of return
- Collect the return memo from your bank. Note the date you received it: your 30 days for the notice run from it.
- If the reason is funds insufficient, exceeds arrangement, account closed, stop payment or signature differs, prepare a cheque bounce notice under Section 138 to the drawer (and the persons in charge if it is a company cheque).
- If the reason is technical (post-dated, present with document, effects not cleared), re-present within the cheque's validity. A cheque can be presented more than once within validity, and a later dishonour can found a Section 138 case.
- If the cheque is stale or has unauthenticated alterations, ask for a fresh cheque and keep the debt alive with a written demand. Your civil remedy for the debt survives.
- Keep the original cheque and memo safe; both are exhibits.
Use the cheque bounce timeline calculator to fix your dates. More on the memo itself: cheque return memo.
Stop payment is not a shield
Buyers sometimes stop payment thinking it avoids a criminal case. The Supreme Court has held that dishonour on a stop-payment instruction can still attract Section 138, and the drawer must show that there were sufficient funds and a genuine reason, such as no debt being due. See stop payment cheque.
Similarly, closing the account after issuing cheques, or signing in a way that does not match the bank's records, has been treated by courts as an attempt to avoid payment in many cases. Each case turns on its facts, so take advice before deciding not to send a notice.
Getting the notice out in time
The Section 138 timeline is strict: notice within 30 days of the memo, 15 days to pay from receipt, complaint within one month after that. FundRaksha Legal has an advocate send the notice within 24 hours of receiving your cheque and memo, and charges 30% only on recovery. 60% of FundRaksha cases settle before court.
Last reviewed: 2026-10-20. Information for Indian businesses; not legal advice.