Legal Notice For Cheque Bounce

Section 138 of the NI Act penalizes when a cheque bounces because there is not enough money in the drawer’s amount. The legal notification for cheque bounce is one of the most crucial procedures that must be followed to comply with the aforementioned regulation. As stated in Shakti Travel & Tours v. State of Bihar, (2002) 9 SCC 415, a suit involving a bounced cheque must be maintainable with a properly filed legal notice. Given the significance of a Section 138 NI Act notice in establishing the basis of a court proceeding before the magistrate, it should be written so that all pertinent facts are readily comprehensible.

What is the rule for the Cheque Bounce Notice?

The NI Act’s Sections 138(b) and (c) provide the legal notice requirements for cheque bounce. According to Section 138(b) of the NI Act, if the payee presents the check for encashment or payment and it is returned for insufficient funds, the payee has 30 days to provide the check’s drawer a formal notice demanding payment.

The National Insurance Act’s Section 138(c) mandates that the drawer of a cheque must reimburse the debt amount within 15 days of receiving a legal notice that the cheque has bounced. If not, the payee is entitled to take legal action. Thus, the 16th day following the drawer’s receipt of the cheque bounce notice is the beginning of the cause of action. The cause of action regarding a cheque bounce notice is defined by the Supreme Court in Dashrath Rupsingh Rathod v. State of Maharashtra, (2014) 9 SCC 129. The cause of action arises when the drawer fails to make the defaulted payment after the cheque bounce notice limitation has passed.

Cheque Bounce Notice Format

Particular items need to be stated very clearly and precisely, even if the legislation does not provide a specific structure to be followed for NI Act cheque bounce notices. Some of the most important things to remember while writing a legal notification for a bounced cheque are listed below:

• The identity and contact details of the individual who issued the cheque, often known as the Drawer;
• The name and address of the payee, the person in whose benefit the cheque was written;
• Details about the cheque that was handed to the bank for encashment or payment; the check’s details, including the amount, date, and check number;
• The date the cheque was returned;
• The Return Memo’s explanation for the check’s bounce; clarity on debt by examining the reason behind the financial transaction;
• A definite request that the necessary payment arrangements be made right away; Citation of NI Act Section 138.

How Should a Cheque Bounce Case Be Started Legally?

• After a cheque is dishonored for thirty days, the beneficiary sends the defaulter a cheque bounce notice by registered mail. The information in the cheque bounce notification should include the following: the kind of transaction, the amount involved, the date the cheque was deposited with the bank, the date the cheque bounced, the cause for the bounce, and the beneficiary’s request for payment made within 15 days.
• If the cheque issuer fails to make payments within the 15-day notice period, the payee may bring a criminal prosecution in court within 30 days of the notice period’s expiration.
• Cheque bounce complaints have to be brought before the same city court where the cheque was presented.
• A hearing will be held and a summons will be sent out by Section 138 of the Negotiable Instruments Act as soon as the case is received into the court.
• For the matter to be resolved, the cheque defaulter would have to come before the court.

Penalties and Punishments

The court will issue a summons and hold a hearing after receiving the complaint, an affidavit, and any pertinent paper trail. If proven guilty, the defaulter faces a financial penalty equal to twice the amount of the cheque, a sentence of imprisonment that can be extended to two years, or both. When there are repeated instances of bounced checks, the bank also has the authority to cancel the account and discontinue providing the chequebook service.

The drawer does not violate any laws if the cheque is paid in full within 15 days of the notice being received. If not, within a month of the notice’s fifteen-day expiration date, the payee may file a complaint in the jurisdictional magistrate’s court.

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