How to draft a Cheque Bounce Notice under Section 138 of NI Act?”

Introduction

Why do most people make their money transactions through the cheque method? Of course, it is a straightforward and secure method for all types of financial transactions. Whether the transaction is commercial or personal, it does not matter. But this method also has some positive and negative factors which we should know.

What happens if someone issues a cheque for money transactions and that cheque bounces or dishonors from the drawer’s side?

In this situation, if the drawer of the cheque does not settle the matter of dishonor of the cheque, then, unfortunately, you would be involved in the legal remedy of the protection of your financial loss. Also, you will need to send a legal notice about the cheque bounce. This article will discuss all things regarding cheque bounce notice in detail.

What is the reason for the cheque bounce?

Suppose a cheque is returned unpaid for a specific reason. In other words, it is also known as a dishonor of cheque. The mainly that reasons are given below.

  • The most common reason is insufficient funds in the payee’s bank account, which gives a cheque.
  • Suppose the signature on the cheque does not match the original signature with the bank records. In other words, a mismatch of the drawer signature.
  • The other reason is that if the cheque’s validity is expired. The legal validity of the cheque is three months from the date of issue. After that period, the said cheque automatically expires as per the negotiable instrument act,1881.
  • The drawer issues a postpaid cheque but a payee deposit before the given date.
  • If the different amount mentioned in the word and number on the particular sessions in the cheque, in that case, said cheque must be a bounce.
  • If the cheque is in a damaged condition and for that reason, some cheque details are not visible to the bank. In that case, the cheque will be bounced.
  • If any overwriting mistake has been made while filling up a cheque or making any changes, corrections in the cheque details are the reason the cheque might be a dishonor.
  • If the cheque fills up with overwriting without countersign or endorsement of the issuance, in that case, the bank can not accept the cheque for encashing, and the bank returns it.

What does Section 138 say on cheque bounce legal notice?

In the Negotiable Instruments Act, under section 138, the legal notice for the dishonor of the cheque must be sent as per provisions mentioned under this section.

Section 138 of the NI Act mentions the criteria regarding the cheque bounce for insufficiency of funds, etc. when a person issues a cheque to the other person to pay the amounts in whole or any part of debts or other liabilities, which is dishonored.

In that situation, the drawer is liable for the offense defined under the act, which is in terms of punishment for imprisonment, extended for one year, or a fine of twice the amount of the dishonored cheque amount or both.

How to send a cheque bounce notice?

After considering some of the above specific reasons for cheque bounce, let’s know how to send a cheque bounce legal notice. The cheque holder presents the cheque in the bank to encash the cheque amount. A cheque is returned due to any one of the above reasons by the bank with a return memo. Then the payee has a reason to send a cheque bounce notice to the drawer. He may send a legal notice to the issuer of the cheque.

Here, we should note that if the cheque is given for the charity, donation, or a gift purpose and it is dishonored, the legal remedy can not be adopted against the cheque drawer.

In the cheque bounce notice, the payee must be mentioned the full details of the dishonor of the cheque. And mention how the drawer has tried to commit an offense covered under the cheque bounce case. The said offense has been covered under section 138 with subsection (b),(c), of the Negotiable Instrument Act,1881.

According to this section, the payess has to demand an unpaid cheque amount, which the bank does not encash. The drawer is fully responsible for paying the said amount of the cheque to the payee. Based on the cause of action, a payee can send a cheque bounce notice to the drawer.

When the cheque is returned or bounced due to insufficient funds in the payee’s bank account, the first step taken by the holder is to issue a demand notice of the payment of the cheque amount. Such notice needs to be sent in writing form under the provision of the NI Act.

The payee can send a demand notice within 30 days after the date of the return memo, which the bank gives sends along with the dishonor of the cheque. The bank would specify why a cheque can not be encashed in the return memo.

Now, after issuing and delivering the legal notice for the cheque bounce, the payee has to be given 15 days to the cheque drawer to make payment of the cheque amount as per the law, after passing the said period, if the drawer fails to pay. Then after the expiry of 15 days, the payee is legally entitled to take legal action against the drawer within 30 days.

What are the elements of the cheque bounce notice?

There are the following elements should be determined while you prepare the cheque bounce notice;

  • The advocate should give the notice on the letterhead of his name or the name of the law firm (it’s not mandatory, but it should be advisable).
  • Mention the full details of drawer name, address, firm name, etc.
  • Mention the full details of dishonor of a cheque like an amount and cheque number, name of the bank, branch name of the bank, etc.
  • Mention the details—summary of the fact which the payee claims.
  • Mention the cheque bounce reason given by the bank in the receipt of the cheque return memo.
  • Mention the date of the check which was issued by the drawer.
  • Describe when the cheque was presented in the bank for the encashment. 
  • Describe how the cause of action arises and which law is employed regarding that offense and punishment.
  • Make a demand to the drawer to pay a cheque amount within 15 days from the receipt of the notice.
  • Mention the provision of law that applies to the drawer if he fails for not making the cheque amount within 15 days.
  • Name and signature of the payee and advocate.

How to draft a reply of legal notice for cheque bounce?

If you got a legal notice for the cheque bounce, you need to take appropriate action because it is a severe offense alleged by the payee or sender for the unpaid cheque amount.

Here one thing is possible if it happened by mistake, you might pay the cheque amount mentioned in the notice and can settle the issue.

Or, if there is something wrong mentioned in the demand notice, you have to take an appropriate defense from your side by filing a detailed reply.

However, there is not mandatory to file a reply for a check bounce notice. But if you file an answer for that, you must be filed within 15 days after receiving the said notice.

There are no straight jacket formants for filing a reply to the legal notice. However, you may consider some essential elements which are given below;

Notice reply should be filed to the lawyer who sent it to you on behalf of his client.

  • Mention your full name and address 
  • Mention the fact from your side which the payee alleges in the legal notice.
  • You may also put your claim to the sender of the notice as a counterclaim with the reply.
  • And lastly, put your and your lawyer’s signature in reply to the cheque bounce notice.

Conclusion 

A cheque bounce notice is crucial for taking legal action against a drawer of the cheque. Every case begins with a legal notice. That’s why it is necessary to draft and send it as per the provision described under the Negotiable Instrument Act,1882. any defect of such notice may be harmful to your case.

Also Read:

When do you need to file a legal notice for recovery of money?

Whether demand notice can be faulted if any other sum indicated in addition to the said amount u/s.138 (b) of NI Act?

If Drawer’s Signature differs can it attract criminal proceedings u/s.138 of IN act?

What is the effect if Drawer’s Signature differs can it attract to cheque bounce case?

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