To send a legal notice for cheque bounce means taking a legal action against the person who has issued a cheque that was returned to the cheque beneficiary unpaid. To know the process fully, watch the video provided below. Before that let us understand, when this happens, it is considered an offence under the Negotiable Instruments Act 1881 in India, and once a legal notice is issued for cheque bounce, it is the responsibility of the cheque issuer to make the payment.
Written by: Abhishek Sahoo
Published on 12-Sep-19
Before talking about legal notice for cheque bounce, let’s understand what cheque bounce means. It occurs when a cheque presented at the bank is returned unpaid. For which a legal notice for cheque dishonour can be given to the person who issued the cheque.
A legal notice for cheque bounce in India is a firm and serious intimation to the cheque issuer for non-payment. There is a fixed format of legal notice for cheque bounce which we will discuss further here.
A cheque bounce notice under Section 138 must be presented to the cheque issuer within 30 days of return of cheque due to its validity. Since cheque bounce is considered as a serious offence in India, which is punishable with imprisonment or fine under Section 138 of the Negotiable Instruments (NI) Act.
When & Why Does Cheque Bounce Happen?
Cheque Bounce is also known as dishonour of cheque, which has specific reasons for it to happen. The are 8 reasons why you are susceptible to have a cheque bounce or receive a legal notice for it, such as:
Cheque bounce normally happens due to insufficient funds in the bank account of the person who issued the cheque.
It can also occur if the signatures on the cheque do not match with the original signature of the person who issued the cheque, much happens in the case of minors holding a bank account.
The other reason is that the date on the cheque has expired, meaning the date is more than 3 months old from the current date since the validity of a cheque is up to 3 months.
Post Dated Cheques (PDC cheques) is another contributing factor to having a legal notice against cheque bounce. PDC are cheques issued for a future date that is being deposited earlier than they are due.
If the amount mentioned in the words section has numbers in any form or vice-versa, and if the cheque has any difference in the words and in numbers for the amount payable, then also, there is a high chance for the cheque to bounce.
If the cheque is not in a good condition and is damaged, torn or disfigured, where some details are not clearly visible or if it has too many stains for whatever reasons, then these types of cheques will bounce.
Any kind of scribbling, overwriting, correction etc on a cheque is not allowed, and if a cheque is found that way, it will be dishonoured. To avoid getting a legal notice for cheque bouncing, always issue a fresh cheque if you make a mistake while writing it.
Overwriting on cheques without authentication and issuance of cheques that have expired validity are also reasons for cheque bounce. However, help from a good lawyer can be taken, only if a clear case of cheating can be proven. The legal route cannot be adopted if the issued cheque is against a donation or gift.
Next time, whenever you issue a cheque, always keep an eye on these 8 reasons, which can get your cheque dishonoured or land you with a legal notice for cheque bounce in India.
When Can Legal Notice for Cheque Dishonour Be Issued?
A legal notice for cheque bounce is essentially a notice sent by an advocate on the behalf of his/her client in response to non-payment of the cheque.
A legal notice for cheque bounce indicates that the cheque beneficiary will proceed with a legal action if the payment for the cheque is not done immediately.
To issue a dishonour of cheque legal notice and get legal help, the following conditions must be present:
The cheque must have been provided towards a liability.
The cheque should have been presented by the beneficiary within 6 months of its validity.
The cheque should have been returned by the bank due to insufficient funds.
The payee makes a demand for the payment by giving a legal notice in writing, within 30 days of the receipt of information by him/her from the bank that funds are insufficient.
The cheque drawer fails to make payment of the said amount of money within 15 days of the receipt of the legal notice for cheque bounce.
Legal action is initiated within one month of the date whence the legal notice is sent.
Section 138 of the Negotiable Instruments Act on Cheque Bounce Legal Notice
For a legal notice against cheque bounce to be valid, it must contain a reference to Section 138 of the Negotiable Instruments Act.
Information about when the cheque was presented, the reason for non-realization of payment and a request to the cheque issuer to arrange for payment immediately through alternate means.
Section 138 elaborates on the dishonour of cheque for insufficiency of funds in the account, etc., stating - 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 offence and shall, without prejudice. to any other provision of this Act, be punished with imprisonment for a term which may extend to one year, 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:
The cheque has been, presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier;
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, within fifteen days of the receipt of information by him from the bank regarding the return of the cheque as unpaid; and
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.
A cheque beneficiary must present the cheque issuer with a cheque bounce notice under Section 138 within 30 days of return of the cheque to protect his/her rights under this section of the Negotiable Instruments Act.
How to Issue a Legal Notice for Cheque Bounce?
To send a legal notice for cheque bounce through an advocate is not compulsory, but taking the help of a good lawyer to send the legal notice can prove beneficial in many ways.
Since a legal notice is generally issued by an advocate on behalf of their client, however, it is not mandatory to send a legal notice for it as there is no specific provision/enactment of the law that makes it mandatory to issue one before filing a suit.
There is though a specific format of legal notice for cheque bounce that needs to be followed when you plan to resolve the issue with a legal action.
The Legal Notice Format for Cheque Bounce
While writing down a legal notice, one has to be careful about each and every word used in it. Since it is a formal intimation subject to further legal action, therefore, one has to be careful about not admitting any fact in the legal notice, which you may deny later in court.
In order to send a legal notice under the NI Act, you need to draft a legal notice for cheque bounce which you can find here.
Once a legal notice is sent, you cannot make any changes to it and later, you cannot even go against the statements and information that you have already mentioned in the legal notice.
To get a sample legal notice for cheque bounce, you can save your time and efforts by availing it from here in a pdf format of legal notice for cheque dishonour.
How to Reply to Legal Notice for Cheque Bounce?
Replying to a legal notice is important since legal notice is an official document sent with respect to taking a legal action against a person for non-payment of the cheque amount.
In most cases, before taking any legal notice you are advised to consult a legal expert. When you receive a legal notice, you have two options;
Either to provide the payment or compensation that the sender has asked for, known as settlement
Or to reply to the legal notice defending yourself
Although, it is not compulsory by law to provide a reply to it, however, it is advisable to seek a legal expert and honour the legal formalities concerned with a fitting reply.
Any legal notice for dishonour of cheque provides a time limit within which a reply has to be sent.
For that, you can carefully read the legal notice, so as to understand what exactly has to be written before sending a reply to the legal notice.
There is no set legal notice format for cheque bounce for sending a good reply, but if you choose to reply to the legal notice, then make sure that the following listed information is clearly laid out, such as:
The reply to the legal notice has to be addressed to the lawyer of the person who has sent you the notice
Your name, description and address must be provided
Mention the facts of the issue with relevant dates and time, along with refuting the allegations made against you
Do not admit or accept any of the allegations made in the legal notice
If you have any grievances against the sender, you may mention them. This will form as part of your counter-claim
Provide a summary of your defence to the issue
It is necessary to hire a lawyer for sending a reply to a legal notice, in order to avoid any mistakes.
A lawyer with good skills of drafting legal notice can collect the information from you and send a befitting reply to the legal notice on your behalf.
One thing to keep in mind is that the reply to any legal notice must be sent on the letterhead of a lawyer. This is where MyAdvo steps in.
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