How to Write Legal Notice for Cheque Bounce/Dishonour

What is cheque bounce and what are the reasons for cheque bounce are discussed in this article. Also, this article, we gonna discuss what is the meaning of cheque bounce and how to write a legal notice for cheque bounce/dishonour with a sample of cheque bounce notice format? 

What is Cheque Bounce/Dishonour?

The cheque dishonour meaning is bouncing of cheque case situation in which the cheque is cannot be processed because of the insufficient amounts in an individual’s bank account. Legal notice for cheque bounce/dishonour must be communicated to the drawer of the crossing a cheque within 30 days from the date of bounced cheque.

A cheque has become one of the most usually used methods for the transaction of money. There is a cheque bounce law in India i.e. Negotiable Instruments Act. In legal words, the cheque is an instrument given by the account holder (called the ‘drawer’) to a specific person (called the ‘payee’), through the drawer’s bank account (called the ‘drawee’) to make payment of a specified balance of amount to the payee. There are numerous cheque bounce offences/cases in India.

However, the cases of cheque bounce are very common these days now due to various reasons. Section 138 of the N.I. An act is known as the cheque bounce section 138.

Section 138 of the Negotiable Instruments (N.I.) Act, 1881 is applicable for cases of cheque bounce. As per Section 138, cheque bounce/dishonour is a criminal offence and is punishable with imprisonment for up to two years or a fine or with both. This does not provide a cheque bounce notice sample under section 138 format.

Read Full Article:-  What is Cheque Bounce? | What are the Reasons for Cheque Bounce?

When The Notice of Cheque Bounce is Issued?

Legal notice for cheque bounce is basically a notice sent by an advocate on behalf of his/her client in reply to non-payment of the cheque and also advocate can send a format of reply to legal notice for cheque bounce.

Legal notice for cheque bounce indicates that the cheque receiver will proceed with cheque bounce legal action if each payment for the cheque is not done promptly. Now you may wonder, that can bankers cheque bounce?

To issue a legal notice of cheque bounce, the following requirements must be fulfilled:

1. The cheque must be presented towards a liability.

2. The cheque should have been given by the payee within 3 months of its validity.

3. The bank checks the cheque and must be restored by the bank due to insufficient funds of the amount.

4. The payee performs a demand for the amount by giving a notice of cheque bounce in writing, within 30 days of the receipt of information by him from the bank that the amount is inadequate.

5. The cheque drawer fails to make payment of that amount of money mentioned in the cheque within 15 days of the receipt of the cheque bounce notice letter.

6. Legal action should be initiated within 30 days from the date on which the cause of action arises.

7. The bank must maintain all the records of the cheque dishonour journal entry in the cash book.

The Requirements for Legal Notice for Cheque Bounce

Following are the essential requirements for the notice of Cheque Bounce -

1. The cheque should be made towards a specific liability.

2. The cheque should be in a legal period.

3. The cheque should be reinstated due to an inadequate amount in the bank account of the drawer.

4. The notice should be given within 30 days of the cheque bounce.

5. The drawer has declined to make the payments in 15 days of Cheque bounce notice, then the legal action can be conveyed against him in 30 days from the date of cheque bounce. 

Legal Procedure for Cheque Bounce Notice

What legal action can be taken for cheque bounce? The following steps should be followed to issue a cheque bounce notice and take legal action:

1. The notice for cheque bounce must be issued by the payee to the defaulter, in 30 days of the cheque dishonoured, by the registered post (or Speed Post). 

2. The cheque bounce notice must be in the decent format, and the following information should be mentioned in the notice of cheque bounce -

    a) nature of the transaction, 

    b) the amount, 

    c) date of cheque deposit, 

    d) date of cheque bounce, 

    e) the correct reasons for cheque bounce, and 

    f) request to make payment in 15 days.

3. If the cheque insolvent declines to make payment within 15 days of cheque bounce notice, then the payee should file a criminal proceeding in the appropriate court within 30 days from the date of expiry of a notice period of 15 days. The cheque bounce complaints must be filed in a court in the city where the cheque was presented.

4. When the criminal case is filed, then the court will hear the case and issue summons under Section 138 of the Negotiable Instruments (N.I.) Act.

5. The drawee has to send a legal notice to the drawer within 30 days of the return memo through a registered post or speed post. This is the cheque bounce notice time limit/period for filing a cheque bounce notice.

6. When the notice is received to the drawer, then the drawer has to make the payment in 15 days from the date notice of cheque bounce.

7. As per section 80 in the Negotiable Instruments Act, when the party is charged that the indorser of an instrument is dishonoured due to non-payment, then he is made liable to pay the interest only from the time that he receives the legal notice of cheque bounce.

8. If further payments are not executed by the drawer, then the drawee has the right to file a criminal complaint against the drawer. 

9. Once the Court receives a complaint made by the drawee, the accused will be summoned and made liable to appear before the court.

10. The cheque insolvent would have to submit surety for the bounced cheque and appear before the Court for resolution of the matter.

11. The proceeding will be initiated as per the procedure given under Section 138 of the Negotiable Instrument Act.

The time limitation for filing a complaint

After receiving the bank return notice, you have to directly issue a demand notice in 30 days from the receipt of knowledge/notice.

If the defaulter does not make any payments of money within the period of 30 days from the receipt of the notice of dishonour cheque, then we can lodge the criminal complaint under section 138 of the NI Act. A criminal complaint about cheque bounce has to be filed within 30 days.

If the complainant delays in filing the complaint, then an application for condonation of delay has to be filed declaring the grounds for the delay or else you will lose your right to file a case under section 138 of the said act.

Reasons for Cheque Dishonour/Bounce

Here, we have discussed the bank cheque bounce reasons lists;

    1) Insufficiency of Funds

    2) Signature Mismatch

    3) Overwriting on Cheque

    4) Stop Payment by the Account Holder

    5) The disparity in the words and figures mentioned on the cheque

    6) Mismatch in Account Number

    7) In case the cheque is issued by a Company, the same does not bear the seal of the company.

    8) In the case of a joint account where both signatures are required, only one sign is there.

    9) Insolvency of the customer

    10) The insanity of the customer

    11) Presented at the wrong branch

    12) Crossing limit of overdraft (OD)

Read Full Article: - Meaning of Cheque Bounce And Cheque Bounce Reasons: Explained

Legal consequences of the bounced cheque

Upon the bounced cheque, the bank return cheque charges a lump sum amount to which the cheque is drawn (the drawer's bank) along with the letter to the payee's bank. This note is to be called the 'Cheque Return Memo' and in the cheque return memo, all the records of the facts of dishonoured cheque shows the reasons for such dishonoured cheque. 

The payee can re-deposit it during its validity period i.e. (within 3 months from the date of issue of the cheque) or can proceed to take legal action against him/her.

The payee has to provide legal notice to the drawer if he decides to proceed with legal action against him by giving the payee enough time to repay the amount by mentioning it in the legal notice of the cheque bounce.

If the payee fails to pay the amount in 15 days from the date of receipt of a memo from the bank of the drawee, then the criminal complaint can be lodged under section 138 of the NI Act. 

Serving of legal notice of cheque bounce before taking any legal action against the drawer is mandatory in case of cheque dishonour.

Jurisdiction of Cheque Bounce Case/Place of filing the Criminal Complaint about Dishonour of a Cheque

The criminal complaint of cheque bounce case can be filed in front of the Judicial Magistrate of First Class (JMFC) or Metropolitan Magistrate Court (MMC). The place of filing the complaint of cheque bounce case shall be prepared based on any of the following grounds –

    1. The place of the bank on which the cheque is drawn;

    2. the place where the cheque is presented to the bank and the same is bounced;

    3. The place of residence/office of the Complainant;       

    4. The place of residence/office of the Accused;

    5. The place where the notice is sent to the drawer of the cheque demanding the cheque amount.

Documents required to be provided along with the complaint

    a. Copy of Original Cheque

    b. Return Memo gave by the Bank

    c. Copy of Demand Notice

    d. Postal Receipt

    e. Limitation Clause

    f. Prayer asking Compensation and punishment for the Accused

Format of Legal Notice for Cheque Bounce under Section 138 of Negotiable Instrument Act, 1881

How to file a cheque bounce case?. While writing the legal notice, one has to be careful about each and every sentence used in it.

How to get a cheque bounce legal notice format? Here, we have given a simple format of the legal notice of cheque dishonour.

Since it is a formal allusion subject to further legal action to be taken, therefore, one has to be careful about not admitting any fact in the legal notice, which you may deny later in the court. 

To get a sample of legal notice for cheque dishonour format, you can save your time by availing it from here, it is the legal notice format for cheque bounce.

This is the format of the cheque bounce notice.

                                                                                                                                    Date: 

To,                                                                                                                               

Name of the party/parties

Address

Contact info.

Sub: Legal notice for cheque bounce under section 138 of Negotiable Instrument Act, 1881.

Dear Sir/Madam,

Under instructions and authority from my client Mr./Ms. __________ I serve the following legal notice of demand  upon you under Section 138 of the Negotiable Instrument Act, 1881:

That is, my client, is a businessman engaged in trading of computers, laptops, computer parts and accessories of the computers and laptops the name of (company) ________ having an office at (place) _________.

That is, in the year ______ you have approached my client through promise of your employee ________ to purchase _______ for your office. Subsequently you have issued purchase order dated _______ amounting to rupees ______ for _______.

That is, you have promised our client to pay the cost of each and every product in the form of a Current Dated Cheque as mentioned in the purchase order.

That is, our client had relied on your promise and as instructed by you delivered the ________ at your office at ______ with the Invoice No. _______ dated _______.

That is, you have issued Cheque bearing No. ____dated on ________ for Rs. ______/- (Rs. ____________only) drawn ____________________ towards payment against the Invoice.

That is, the said cheque No. _____dated ________for Rs. _______/- was presented by our client _______ on ____ to your bankers i.e. ______________.

That is, to our client shocked and confused the said cheque had been bounced by your bankers with the reason "Fund Insufficient" which was inferred to our client by their _______ through their cheque return memo dated on _________.

That is, thereafter despite many telephonic reminders made by my client, you failed to make the payment.

That is, it is now clear that you had a fraudulent intention at the time of purchasing ______ from my client and deceived my client.

That is, my client, states that you have issued the above-said cheques only intending to defraud our client which amounts to an offence punishable under section 138 of the Negotiable Instruments Act.

That is, under the circumstances, we call upon you to pay Rs. ____________ /- in a limit of 15 days from the date of receipt of this legal notice, failing which our client will be necessitated to take legal action against you in a court of law for an offence punishable under section 138 of Negotiable Instruments Act for which you will be liable for all the costs and consequences.

That is, this is without prejudice to all other legal rights and remedies available to our client for the above-stated purpose.

That is, you are liable to pay a sum of Rs. _______/- as necessary cost and expenses of sending the present legal notice to you.

That is, a copy of this legal notice is also kept at my office for further ready reference if required in the future.

Yours faithfully,

Signature

(Advocate)