Cheque Bounce Legal Notice under Section 138 NI Act and Recovery under Order 37 CPC
A practical, updated format for demanding payment after dishonour of a cheque, including a cheque returned with the remark "Payment Stopped by Drawer", together with guidance on a possible summary recovery suit under Order XXXVII of the Code of Civil Procedure, 1908.
Legal position reviewed: 31 August 2026For a prosecution under Section 138 of the Negotiable Instruments Act, 1881, the payee or holder in due course must make a written demand for the cheque amount within 30 days of receiving information from the bank regarding dishonour. The drawer then has 15 days from receipt of the notice to make payment. The cheque must represent, wholly or partly, a legally enforceable debt or other liability.
When Section 138 may apply
Section 138 of the Negotiable Instruments Act, 1881 applies when its statutory conditions are satisfied. The provision is not confined in practice to a return memo stating only "insufficient funds". The Supreme Court has recognised that dishonour following stop-payment instructions can also attract Section 138, subject to the facts, the statutory presumptions and the requirement of a legally enforceable debt or liability.
- The cheque should have been issued for discharge, wholly or partly, of a legally enforceable debt or other liability.
- The cheque must be presented within its period of validity.
- The statutory written demand must be made within 30 days after the payee or holder receives information from the bank regarding dishonour.
- The demand should clearly claim the cheque amount. Other contractual claims such as interest, costs or damages may be stated separately where legally supportable.
- If the drawer pays the cheque amount within 15 days after receiving the statutory notice, the Section 138 cause of action does not mature on that dishonour.
A civil money-recovery action and a Section 138 prosecution are distinct remedies. Order XXXVII provides a special summary procedure for the classes of suits specified in that Order, including suits upon bills of exchange and certain suits for debt or liquidated demand based on written contracts, enactments or guarantees. Whether the particular claim can be instituted as a summary suit depends on the pleadings, documents, relief claimed, territorial and pecuniary jurisdiction, and any applicable local High Court amendments or rules.
Updated Legal Notice Format for Cheque Dishonour
This specimen should be adapted to the actual transaction, cheque particulars, return memo, parties and evidence. Avoid allegations of fraud, cheating or dishonest intention unless they are factually justified and legally relevant.
BY REGISTERED POST A.D. / SPEED POST / OTHER PROVABLE MODE OF SERVICE
Date: __________
To,
Mr./Ms. ________________________
Designation, if applicable
Name of Company/Firm, if applicable
Full Address
Subject: Statutory demand notice under Section 138 of the Negotiable Instruments Act, 1881 in respect of dishonoured cheque(s), without prejudice to civil recovery remedies
Sir/Madam,
Under instructions and authority from our client, M/s./Mr./Ms. ________________________, having address at ________________________ ("our Client"), we hereby serve upon you the following notice:
- That our Client is engaged in the business of ________________________ / had dealings with you in relation to ________________________.
- That during __________, you approached our Client for purchase/supply/services/financial accommodation or otherwise entered into the transaction described as ________________________.
- That pursuant to the agreed terms, our Client supplied goods/rendered services/advanced money or otherwise performed its obligations, and an amount of Rs. __________ (Rupees ________________________ only) became due and legally payable by you.
- That, after giving credit for payments received, if any, a sum of Rs. __________ remained due and payable by you to our Client.
- That towards discharge, wholly or partly, of the aforesaid legally enforceable debt/liability, you issued the following cheque(s) in favour of our Client:
| Cheque No. | Date | Bank / Branch | Amount (Rs.) |
|---|---|---|---|
| __________ | __________ | __________ | __________ |
| __________ | __________ | __________ | __________ |
- That our Client presented the aforesaid cheque(s) for encashment within their validity period through ________________________ Bank.
- That the cheque(s) were returned unpaid by the bank vide return memo(s) dated __________ with the reason "Payment Stopped by Drawer" / "Funds Insufficient" / other bank reason. Our Client received information of the dishonour on __________.
- That despite the amount being due and despite requests for payment, you have failed to pay the cheque amount of Rs. __________ (Rupees ________________________ only).
- Accordingly, through this notice, you are hereby called upon to pay the cheque amount of Rs. __________ (Rupees ________________________ only) to our Client within 15 (fifteen) days from the date of receipt of this notice.
- In the event of your failure to make payment of the aforesaid cheque amount within the statutory period, 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.
- Without prejudice to the statutory demand above, our Client also reserves the right to institute appropriate civil recovery proceedings, including a summary suit under Order XXXVII CPC where maintainable, and to claim lawful interest, costs and other reliefs available on the facts and under the applicable contract and law.
This notice is issued without prejudice to all other legal rights and remedies of our Client.
A copy of this notice is retained in our office for record and future action.
Yours faithfully,
For ________________ Associates / Advocate
________________________
Advocate
Enrollment No. ________________
Practical drafting notes
The Section 138 demand should identify the cheque, the dishonour and the amount demanded with sufficient clarity. Where there are multiple cheques, list each cheque and its return memo. Keep proof of dispatch and service, the original cheque or legally admissible record, bank return memo, underlying invoices/contracts/account statements and correspondence. If the drawer is a company, the proposed complaint should also be examined in light of Section 141 of the Negotiable Instruments Act and the specific role of persons sought to be proceeded against.
Official law and judgment links
Frequently Asked Questions
Within how many days should a Section 138 demand notice be sent?
The written demand must be made within 30 days from receipt of information from the bank regarding return of the cheque as unpaid.
How much time does the drawer get to pay after receiving the notice?
The drawer gets 15 days from receipt of the statutory notice to make payment of the cheque amount.
Can "payment stopped by drawer" lead to a Section 138 case?
It can. Supreme Court authority recognises that stop-payment dishonour may come within Section 138, subject to satisfaction of the statutory requirements and the legally enforceable debt or liability requirement.
Can civil recovery and Section 138 proceedings both be pursued?
They are different remedies. Subject to maintainability, limitation, jurisdiction and the facts of the transaction, civil recovery may be pursued independently of the statutory cheque-dishonour remedy.
Disclaimer: This specimen is for general legal information and drafting assistance. Limitation, jurisdiction, service, contractual terms and case-specific facts should be verified before issuing a notice or commencing proceedings.