Format for Legal Notice for Cheque Bounce/Dishonour

Format for Legal Notice for Cheque Bounce/Dishonour

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Format for Legal Notice for Cheque Bounce/Dishonour
Format for Legal Notice for Cheque Bounce/Dishonour

What is a ChequeDishonor

A cheque has been one of the most commonly used methods for payments. In simple words, cheque is an instrument given by the account holder (called the ‘drawer’) to a specific person (called the ‘payee’), directing the drawer’s bank (called the ‘drawee’) to make payment of a specified amount to the payee. However, cases of chequedishonour are very common these days due to various reasons.

Section 138 of the Negotiable Instruments Act, 1881 are applicable for cases of chequedishonour. According to Section 138, chequedishonour is a criminal offence and is punishable with imprisonment up to two years or with monetary penalty or with both.

Reasons for Cheque Dishonor-

  • Insufficiency of Funds
  • Signature Mismatch
  • Overwriting on Cheque
  • Stop Payment by the Account Holder
  • Disparity in the words and figures mentioned on the cheque
  • Mismatch in Account Number
  • In case cheque is issued by a Company, the same does not bear the seal of the company.
  • In case of joint account where both signatures are    required, only one sign is there
  • Insolvency of the customer
  • Insanity of the customer
  • Presented at the wrong branch
  • Crossing limit of overdraft (OD)

Consequences of Dishonor of Cheque

Upon dishonour of a cheque, the bank on which the cheque is drawn (the drawer’s bank) returns the cheque along with a note to the payee’s bank. This note called the ‘Cheque Return Memo’, records the fact of dishonor and shows the reason for such a dishonour. The payee can re-deposit the cheque during its validity (within 3 months from its stated date of issue) or can proceed to take legal action.

The payee has to provide a written legal notice to the drawer if he decides to proceed legally giving the payee enough time to repay the amount.

If the payee fails to pay the amount within the period of 15 days from the date of receipt of memo from the bank, then the prosecution can be launched under section 138 of the Negotiable Instrument Act. Serving of Notice before taking any legal action is mandatory in case of Cheque dishonor.

Jurisdiction of Cheque Dishonor/Place of filing the Complaint

The Complaint of Cheque Dishonor case lies in front of JudicialMagistrate of First Class or Metropolitan Magistrate. The place of filing the complaint shall be determined based on any of the following           –

  • Place of the bank on which the cheque is drawn;
  • Place where cheque is presented to the bank and the same is dishonoured;
  • Place of residence/business of the complainant;       
  • Place of residence/business of Accused;
  • Place from where the notice is sent to the drawer of the cheque demanding the cheque amount.

Documents required to be Furnished along with the Complaint-

  • Copy of Original Cheque
  • Return Memo given by the Bank
  • Copy of Demand Notice
  • Postal Receipt
  • Limitation Clause
  • Prayer asking Compensation and punishment for the Accused

Format for Legal notice under Section 138 of Negotiable Instrument Act for dishonour of cheque

To,                                                                                 Dated:

Mr. ABC,

Dear Sir,

Under the instruction and authority from my client Mr. A( here referred to as my ‘client’), I do hereby serve upon you the following notice of demand under Section 138 of the Negotiable Instrument Act, 1881:

  • That my client knows you, the notice, from the last 4-5 years and on that account you had gained the faith and confidence of my client, that you demanded a friendly loan of Rs.4,00,000 from my client in the month of May. My client provided you the said amount.
  • That earlier, you issued a cheque dated 27th June, 2015 for Rs. 2,50,000 drawn on ******, in order to discharge your partial liability. At the time of issuing the cheque, you assured my client that the same is good for value and will be honoured as and when presented.
  • That when the aforesaid cheque was presented, for encashment by my client to his banker the same was returned unpaid by the banker with the reason that there was “Insufficient Fund”. My client informed you about it through telephone.
  • Despite various reminders, you failed to make payment to my client. You tried to avoid the matter and started to ignore my client. Since my client is left with no other option but to present you with legal notice.
  • That you have failed to comply with the provisions of the law and also failed to discharge your liability from your account and the same cheque was dishonoured intentionally and willfully.
  • That, either you discharge your liability towards my client in next 15 days or criminal and civil charges will be framed against you, and you can be punished for imprisonment which may extend to  two  years, or with fine which may extend to twice the amount of the cheque, or with both

Advocate

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