Cheque bounce notice format — s. 138, Negotiable Instruments Act

When you need this

• When a cheque given to you has been returned unpaid — insufficient funds, payment stopped, account closed
• Within thirty days of the bank informing you of the return, which is the window that decides whether s. 138 stays available at all
• When a customer paid an invoice by cheque and the cheque has bounced
• When a security cheque given against a loan or an advance has been dishonoured
• Before filing any complaint — this notice is a precondition to the offence, not an optional opening move

What this document must contain

• The underlying legally enforceable debt — Section 138 protects a cheque issued in discharge of a debt or other liability. Say what the money was for. A cheque given as a gift, or against a liability that has ceased to be enforceable, does not attract the section.
• The full particulars of the cheque — Number, date, amount and the bank it was drawn on. These are the facts the complaint will be built from, and an error here is repeated in every document that follows.
• The date of presentation, showing it was within validity — A cheque presented after its validity period has expired does not give rise to the offence, so the notice should show on its face that presentation was in time.
• The date you received the bank’s return memo, and the reason recorded on it — This is the date the thirty-day clock runs from — not the date on the cheque, and not the date of presentation. It is the single most important date in the document.
• An unambiguous demand for the cheque amount, and fifteen days to pay it — Demand the cheque amount clearly and on its own. Rolling interest, damages and legal costs into one composite figure has repeatedly been litigated as a failure to make a valid demand for the cheque amount, which is what the section requires.
• Service at the correct address, by a method that leaves proof — Registered post with acknowledgement due to the drawer’s last known address, with the dispatch record kept. Service is a fact you will have to prove, and an undelivered notice sent to a stale address is a defence handed over free.
• The consequence, stated plainly — That a complaint under s. 138 will follow if payment is not made within the fifteen days. The notice is a demand with a stated consequence; leaving the consequence out weakens both its legal and its practical effect.

The law that governs it

• Negotiable Instruments Act, 1881 — s. 138 — Dishonour of a cheque for insufficiency of funds is an offence punishable with imprisonment which may extend to two years, or a fine which may extend to twice the amount of the cheque, or both. The provisos make it conditional: presentation within the period of validity, a written demand made within thirty days of receiving information of the dishonour from the bank, and failure by the drawer to pay within fifteen days of receiving that demand.
• Negotiable Instruments Act, 1881 — s. 142 — The complaint must be in writing, made by the payee or the holder in due course, and filed within one month of the date on which the cause of action arises under clause (c) of the proviso to s. 138 — that is, once the fifteen days have run out. A court may take cognizance of a late complaint where sufficient cause for the delay is shown.
• Negotiable Instruments Act, 1881 — ss. 143A and 148 — The trial court may direct the drawer to pay the complainant interim compensation of up to twenty per cent of the cheque amount, and an appellate court may require a deposit of at least twenty per cent of the amount awarded. This is why a s. 138 proceeding moves money in a way an ordinary civil recovery suit does not.

Common mistakes

• Counting the thirty days from the date on the cheque, or from the date of presentation, instead of from the day the bank informed you of the dishonour
• Sending the notice by ordinary post or over WhatsApp alone, leaving no proof of service to produce later
• Demanding the cheque amount, interest, damages and legal costs as one lump sum, which invites the argument that no valid demand for the cheque amount was ever made
• Losing track of which dishonour the notice and the complaint are actually built on, after presenting the same cheque more than once
• Letting the one-month filing window lapse while waiting to see whether payment turns up

Frequently asked questions

How long do I have to send a cheque bounce notice?

Thirty days from the receipt of information from the bank that the cheque has been returned unpaid, under proviso (b) to s. 138. That is the date on your side of the transaction — not the date on the cheque and not the date you presented it — and missing it removes the criminal remedy for that dishonour.

What happens if the drawer pays within the fifteen days?

Then the offence is not complete and no complaint lies. Payment within the statutory window is a complete answer to a s. 138 case, which is exactly what the notice period is for — it gives the drawer a final chance and gives you a clean record of having offered it.

Can I file a civil suit for the money as well?

Yes. The s. 138 proceeding is criminal and results in a fine or compensation; recovering the debt itself through a civil suit is a separate remedy with its own limitation period. Reserve the civil remedy expressly in the notice so nothing you write is read as giving it up.

The cheque was only given as security — does s. 138 still apply?

It turns on whether a legally enforceable debt or liability existed when the cheque was presented. A security cheque backing a live liability is generally within the section; one given against a liability that never arose, or that had already ceased to be enforceable, is contested ground and is decided on the facts of the transaction.

Related documents

• MSME Statutory Notice for Non-Payment
• Vendor / Supplier Agreement
• Master Services Agreement (MSA)
• All templates