Cheque Dishonour | Negotiable Instruments Act, 1881

Legal Notice Format for Cheque Bounce under Section 138 NI Act

Updated draft of a statutory demand notice after dishonour of a cheque issued towards a legally enforceable debt or liability, with the current Section 138 timeline, filing essentials and official legal references.

Time limits are critical: the payee or holder in due course must issue the written demand notice within 30 days of receiving information from the bank that the cheque has been returned unpaid. The drawer then has 15 days from receipt of the notice to pay the cheque amount.
Cheque presentationPresent the cheque within its validity period. RBI directions presently prescribe a three-month validity period for cheques.
30 daysSend the written demand notice within 30 days from receipt of bank information regarding dishonour.
15 daysThe drawer gets 15 days from receipt of the statutory notice to make payment of the cheque amount.

When Section 138 applies

Section 138 of the Negotiable Instruments Act, 1881 applies where a cheque drawn by a person on an account maintained by that person is returned unpaid for the reasons covered by the provision and the cheque was issued for discharge, wholly or partly, of a legally enforceable debt or other liability. The statutory conditions relating to presentation, notice and non-payment must be satisfied.

The notice should identify the cheque, the transaction or liability, the bank-return information and the amount demanded. It is prudent to demand the cheque amount clearly and unambiguously. Any additional claim for interest, notice charges or other civil dues should be separately identified so that the statutory demand remains clear.

Updated Section 138 Legal Notice Format

Replace the placeholders with facts supported by the cheque, bank return memo, invoice/agreement/account statement and other relevant records. Avoid unnecessary allegations that cannot be proved.

LEGAL NOTICE UNDER SECTION 138 OF THE NEGOTIABLE INSTRUMENTS ACT, 1881

By Speed Post / Registered Post / Courier and, where appropriate, electronic mode

Date: ____________

To:
Mr./Ms./M/s. ____________________________
Address: ________________________________________________________

Subject: Statutory demand notice under Section 138 of the Negotiable Instruments Act, 1881 in respect of dishonoured Cheque No. __________ dated __________ for ₹__________.

Sir/Madam,

Under instructions and on behalf of my/our client, M/s./Mr./Ms. ____________________________, having address at ________________________________________________, I/we hereby serve upon you the following statutory notice:

1. That you had dealings/transactions with my/our client in relation to ____________________________________________________________, pursuant to which an amount of ₹____________ became legally due and payable by you to my/our client.

2. That towards discharge, in whole or in part, of the aforesaid legally enforceable debt/liability, you issued Cheque No. ____________ dated ____________ for ₹____________ (Rupees ________________________________ only), drawn on ________________________________ Bank, __________________ Branch, in favour of my/our client.

3. That my/our client presented the said cheque for encashment through ________________________________ Bank within its validity period.

4. That the cheque was returned unpaid by the bank vide return memo dated ____________ with the reason stated as "____________________________".

5. That information regarding dishonour was received by my/our client on ____________. Despite the liability remaining outstanding, the cheque amount has not been paid.

6. Accordingly, through this notice, you are hereby called upon to pay to my/our client the cheque amount of ₹____________ (Rupees ________________________________ only) within 15 days from the date of receipt of this notice.

7. In the event you fail to make payment of the aforesaid cheque amount within the statutory period, my/our client shall be entitled to initiate appropriate proceedings under Section 138 and other applicable provisions of the Negotiable Instruments Act, 1881, before the competent court, at your risk as to costs and consequences.

8. This notice is without prejudice to my/our client's other lawful civil or statutory remedies for recovery of amounts, interest, damages or costs, if independently available on the facts and under applicable law.

You are therefore advised to comply with the above demand within the statutory period and avoid further legal proceedings.

A copy of this notice and proof of dispatch are retained for record and future proceedings.

Yours faithfully,

____________________________
Advocate / Authorized Legal Representative
For and on behalf of ____________________________

What happens after the notice?

If the drawer does not pay the cheque amount within 15 days of receiving the statutory notice, the cause of action under Section 138 arises. Under Section 142, the complaint is ordinarily required to be filed within one month from the date on which that cause of action arises, subject to the court's statutory power to condone delay on sufficient cause being shown.

Section 142 also contains special territorial-jurisdiction rules. Where the cheque is delivered for collection through an account, jurisdiction is generally linked to the branch where the payee or holder in due course maintains the account. Where presented otherwise through an account, the statutory rule refers to the branch of the drawee bank where the drawer maintains the account.

Cheque issued by a company or firm

Where the drawer is a company, Section 141 contains specific provisions concerning the company and persons who were in charge of and responsible for the conduct of its business at the relevant time, subject to the statutory requirements and defences. A notice involving a company, partnership firm or other business entity should therefore correctly identify the drawer and the persons against whom liability is legally proposed.

Practical notice checklist

  • Confirm that the cheque was issued towards a legally enforceable debt or liability.
  • Record the cheque number, date, amount, drawee bank and branch accurately.
  • Preserve the cheque/legally admissible image or record and the bank return memo.
  • Calculate the 30-day notice period from the date bank dishonour information was received.
  • Demand the cheque amount expressly and separately from any additional civil claims or notice charges.
  • Send the notice to the drawer's correct and provable address and preserve dispatch/tracking/delivery evidence.
  • Calculate the 15-day payment period from receipt/deemed service according to the applicable facts and law.
  • If payment is not made, calculate the complaint limitation under Section 142 without delay.

Official resources

Drafting note

The earlier sample included assertions of dishonest intention and cheating as if they were automatic consequences of cheque dishonour. Those allegations are not necessary ingredients of a Section 138 statutory demand notice and should not be made routinely without a separate factual and legal basis. The revised format concentrates on the legally enforceable liability, cheque particulars, dishonour, statutory demand and prescribed time limits.