Cheque Bounce Notice Format

Notice on Cheque Bounce

Section 138 notice is the notice prepared when a cheque is bounced. It is printed on the letterhead of the business/ on a white sheet and is delivered to the cheque issuer once the cheque he issued gets bounced. The name of cheque beneficiary, name, and address of issuer, cheque return date and reason, request on finding an alternative payment method, and the words from Section 138 of the Negotiable Instrument Act. Issuing the cheque bounce notice is through the postal service thus the issue date of notice can be recorded officially. Both the parties will keep a copy of the notice.

When and Why?

• Must have been provided towards a liability.
• The cheque should have been presented by the beneficiary within a period of 6 months of its validity.
• The beneficiary should present the cheque within 6 months.
• Insufficient funds should be the reason for returning from the bank.
• Within 30 days, the payee can make a demand for an alternative payment method from the issuer.
• Within 15 days from the cheque bounce notice, the drawer fails to make payment.
• Within one-month, legal action is initiated.

How?

Through the registered post, the beneficiary must issue the cheque bounce notice to the issuer within days of bounce. It should contain all the relevant information, mode of transaction, date of bounce, amount details along with a request on finding an alternative payment method.
If failed to repay the amount or to make a transaction within the notice period, the payee can file a criminal case against the issuer. The complaint filing court and location in which the cheque was presented should be the same city.
Under, Section 138 of the Negotiable Instrument Act, after the hearing the court will issue the summons. The cheque issuer must then present before the court and find a solution to the matter.

LAWS

Section 138 of Negotiable Instrument Act

138 Dishonour of cheque for insufficiency, etc., of funds in the account.
Where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offense and shall, without prejudice to any other provisions of this Act, be punished with imprisonment for 19 [a term which may be extended to two years], or with fine which may extend to twice the amount of the cheque, or with both: Provided that nothing contained in this section shall apply unless—

1. the cheque has been presented to the bank within six months from the date on which it is drawn or within the period of its validity, whichever is earlier;
2. the payee or the holder in due course of the cheque, as the case may be, makes a demand for the payment of the said amount of money by giving a notice in writing, to the drawer of the cheque, 20 [within thirty days] of the receipt of information by him from the bank regarding the return of the cheque as unpaid; and
3. 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.

Explanation. — For this section, “debt or other liability” means a legally enforceable debt or other liability.

Section 141 of the Negotiable Instrument Act

141 Offences by companies. —

1. If the person committing an offense under section 138 is a company, every person who, at the time the offense was committed, was in charge of, and was responsible to the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the offense and shall be liable to be proceeded against and punished accordingly: Provided that nothing contained in this sub-section shall render any person liable to punishment if he proves that the offense was committed without his knowledge, or that he had exercised all due diligence to prevent the commission of such offense: 22 [Provided further that where a person is nominated as a Director of a company under his holding any office or employment in the Central Government or State Government or a financial corporation owned or controlled by the Central Government or the State Government, as the case may be, he shall not be liable for prosecution under this Chapter.]
2. Notwithstanding anything contained in sub-section (1), where any offense under this Act has been committed by a company and it is proved that the offense has been committed with the consent or connivance of, or is attributable to, any neglect on the part of, any director, manager, secretary or another officer of the company, such director, manager, secretary or another officer shall also be deemed to be guilty of the offense made and shall be liable to be proceeded against and punished accordingly. Explanation. — For this section, —
3. “company” means anybody corporate and includes a firm or other association of individuals; and
4. “director”, concerning a firm, means a partner in the firm.