If a person draws a cheque in favour of another, and the same cheque is returned when produced

before the bank for encashment, it is legally termed as cheque dishonour and cheque bounce in
general terms. Section 138 of Negotiable Instruments Act, 1881 [‘NI Act'] provides for criminal
provision regarding a cheque bounced due to insufficiency of funds. When a cheque bounces due
to insufficiency of funds in the drawer's amount, it is punishable under Section 138 of the NI
Act. However, one of the most important formalities to be followed under the said provision
is the legal notice for cheque bounce. A properly served legal notice is a must for
maintainability of a case of cheque bounce as laid in Shakti Travel & Tours v. State of
Bihar, (2002) 9 SCC 415. Since a Section 138 NI Act notice is important for laying the
foundation of a Court case before the Magistrate, it should be drafted in a manner that all facts of
the matter are understandable at a glance. Major aspects related to a legal notice under Section
138 of the NI Act have been dealt with on this post....

https://www.scconline.com/blog/post/2023/03/11/ni-act-cheque-bounce-notice-explainer-legal-
research-knowledge/

Cheque Bounce Notice: What is the Rule?

The law regarding legal notice for cheque bounce is available under Section 138 (b) and (c) of
the NI Act.

Section 138 (b) of the NI Act provides that

“the payee or the holder in due course of the cheque makes a demand for the payment of the said
amount of money by giving a notice in writing to the drawer of the cheque within thirty days of
the receipt of information by him from the bank regarding the return of the cheque as unpaid.”
It means that once the payee produces the cheque for encashment/payment and the same gets
dishonoured due to insufficiency of funds, the payee has 30 days to serve a legal notice to the
drawer of the cheque regarding payment of money.

Section 138 (c) of the NI Act lays that

“the drawer of such cheque fails to make the payment of the said amount of money to the payee
or as the case may be, to the holder in due course of the cheque within fifteen days of the receipt
of the said notice.”

In other words, after receiving a legal notice for cheque bounce, it is the duty of drawer of the
cheque to repay the debt amount within a period of 15 days of receiving such notice. Otherwise,
the payee gets the right to proceed through the Court of law. Hence, the cause of action arises
from the 16th day after serving the cheque bounce notice to the drawer. The Supreme Court in
Dashrath Rupsingh Rathod v. State of Maharashtra, (2014) 9 SCC 129 explained the cause of
action regarding cheque bounce notice, which arises when the drawer fails to pay the defaulted
payment after the cheque bounce notice limitation lapses....

https://www.scconline.com/blog/post/2023/03/11/ni-act-cheque-bounce-notice-explainer-legal-
research-knowledge/
Cheque Bounce Notice Format
Although the law does not provide for any specific format to be followed for NI Act cheque
bounce notice, there are some things which need to be laid out in a very clear and precise
manner.

 Given below are some of the major pointers to be taken care of while drafting a legal
notice for cheque bounce:

 Name and address of the person who drew the cheque, i.e. Drawer;

 Name and address of the person in whose favour such cheque was drawn, i.e. the Payee;

 Information regarding the cheque presented before the bank for payment/ encashment;

 Details of the cheque, i.e. cheque number, date and amount;

 Date on which the cheque was returned;

 Reason for cheque bounce as mentioned in the Return Memo;

 Clarity on debt through the purpose for which the financial transaction was done;

 Clear request for immediate arrangements to be made for payment of the amount;

 Reference of Section 138 of NI Act....

Important Points for Cheque Bounce Notice

There are several things to be taken care of before sending a legal notice for cheque bounce.
Given below are some of the pointers for people who are confused about how to send cheque
bounce notice so that things go in their own favour in the Court:
 Keep the original copies of the Cheque and Return Memo at a safer place.

 Send the legal notice for cheque bounce through the following modes:
1. By Post through Registered Post Acknowledgment Due (RPAD).
2. E-mail through an Advocate.
 3. On WhatsApp

 The complainant in a matter of Section 138 of NI Act must be the person in whose favour the
cheque was drawn. Hence, the same should be noted while following the cheque bounce
notice format.

 Cheque Bounce notice is addressed to the person who drew the cheque which has been
dishonoured as per the provisions of Section 138 of NI Act.

 In case of a company, the NI Act cheque bounce is addressed to the company, and the
persons responsible for administration and business affairs of such company may also be
addressed

 The legal notice for cheque bounce should include the exact amount for which the cheque
dishonoured was drawn, however, charges for dishonour or the legal fees may be included.

 Since Section 138 of NI Act focuses upon the financial transaction against a debt, the same
should be mentioned for the purpose for which the cheque was drawn. Transaction must
comply with the existing laws as well, which means that the purpose for which the cheque
was drawn is not against the law.

 Although the law provides for a cheque bounce notice period, the same must be mentioned in
the legal notice being served to be on the safer side.

 It may be noted that the limitation period for a legal notice under Section 138 of the NI Act
commences at the time of presentation of the cheque for encashment. Hence, if the cheque
was first presented and the period has lapsed for serving legal notice, the same may be
presented again for encashment so that another cheque bounce memo is received, provided
that the validity of the cheque allows so.

Concluding hereby, a well drafted cheque bounce legal notice may save a lot of time and trouble
for the person who is already suffering due to a financial interest which is yet to be satisfied....

https://www.scconline.com/blog/post/2023/03/11/ni-act-cheque-bounce-notice-explainer-legal-
research-knowledge/
Procedure to be followed in matters relating to Article 138 of
the Act is as follows:
 A legal notice shall be sent to the drawer by registered mail containing all relevant
information within 15 days of cheque dishonour. On the other hand, if payment is not
made, a claimant is to bring a criminal case according to the Section 138 of the Act, with
the appropriate magistrate court within 30 days from the date of expiry date which is
stated in the notice.
 The defendant or his designated attorney will present in the witness box and provide
specifics of the case. If it is satisfied and the complainant finds substance, the accused
will be summoned to appear before the Court.
 If the accused abstain from appearing after being served with the summons, the court
may issue a bailable warrant. Even afterward a non-leasing warrant may be issued if the
drawer does not appear.
 If the drawer/accused appears, he can have a bail bond for the court. After which the
accused's plea is recorded, the court will post the case for punishment if he pleads guilty.
Unless the person accused denies the charges a copy of the complaint will be sent to him.
 To support his complaint, the plaintiff may present his evidence by way of an affidavit
and produce all documents including the original. The complainant is tested by the
accused or his lawyers.
 The accused will be given a chance to prove himself. The accused will also be allowed to
present his documents and witnesses in support of his case. The plaintiff must investigate
the accused and his witnesses.
 The final stage of the trial is the arguments in which the court renders a judgment. If the
accused is acquitted, the matter ends but the defendant can continue to appeal before the
High Court, and if he is convicted, he is still entitled to appeal to the Court of Sessions.
 The crime under Article 138 of the Act has been made compoundable. It should be noted.

What are the required documents to be submitted along

with the Complaint?
 Copy of Original Cheque
 Return Memo which was given by the Bank
 Copy of Demand Notice
 Postal Receipt
 Limitation Clause

What’s the place of filing the complaint?

Vakilsearch will help you file the complaint. Cheque Dishonor Allegation lies before the First
Level Court Magistrate or the Metropolitan Magistrate.

 Place of the bank in which the required cheque is drawn

 Place where the cheque is given to the bank
 Location of the respected residence/business of the complainant
 Residence or the business of the Accused place
 The place from where the notice is sent to the drawer of the cheque asking for the amount
on the cheque
The procedure for filing a complaint under Section 138 of the Negotiable Instruments Act, 1881,
involves several steps. Here's the complete procedure:

1. Sending Legal Notice:

o Within 30 days of receiving information from the bank regarding the dishonor of
the cheque, the payee must send a legal notice demanding payment to the drawer
of the cheque.
o The notice must be sent through registered mail and should contain all relevant
information regarding the dishonored cheque.
2. Filing Complaint:
o If the drawer fails to make the payment within 15 days of receiving the legal
notice, the payee can proceed to file a complaint under Section 138.
o The complaint should be filed before the appropriate magistrate court within 30
days from the date of expiry of the notice period.
3. Initiating Proceedings:
o The complainant files the complaint along with necessary documents like a copy
of the original cheque, return memo from the bank, copy of the legal notice,
postal receipt, and limitation clause.
o The complaint can be filed at various places such as the place where the bank is
located, where the cheque is presented to the bank, where the complainant resides
or conducts business, or where the accused resides or conducts business.
4. Summoning of Defendant:
o After filing the complaint, the court issues summons to the defendant or his
designated attorney to appear before the court.
o If the defendant fails to appear after being served with summons, the court may
issue bailable or non-bailable warrants as necessary.
5. Recording Plea:
o When the defendant appears before the court, his plea is recorded.
o If the defendant pleads guilty, the court proceeds to pronounce the sentence.
o If the defendant pleads not guilty, a copy of the complaint is provided to him, and
the trial proceeds.
6. Evidence Stage:
o Both parties have the opportunity to present their evidence.
o The complainant presents evidence through an affidavit and produces all relevant
documents, including the original cheque.
o The accused is allowed to present his evidence and witnesses in support of his
defense.
7. Cross-Examination:
o Both parties have the right to cross-examine each other's witnesses to test the
veracity of their claims.
8. Arguments and Judgment:
o After the evidence stage, both parties present their arguments before the court.
o The court then delivers its judgment based on the evidence presented and
arguments made.
 oIf the accused is acquitted, the matter ends but the complainant can appeal under
section 378(4) in the high court . If convicted, the accused has the right to first
appeal in the sessions court
9. Compoundable Nature:
o It's important to note that the offense under Section 138 is compoundable,
meaning it can be settled between the parties outside of court.
10. Documentation:

 Along with the complaint, the required documents such as a copy of the original cheque,
return memo, demand notice, postal receipt, and limitation clause must be submitted.

11. Place of Filing Complaint:

 The complaint can be filed before the First Level Court Magistrate or the Metropolitan
Magistrate, depending on the jurisdiction.

Following these steps ensures the proper initiation and resolution of a complaint under Section
138 of the Negotiable Instruments Act.