Notice Under Negotiable Instruments Act Regarding Dishonour Cheque

 What is a Negotiable Instrument? Instrument?

The word negotiable means ‘transferable by delivery’ and the word instrument means ‘a written document by which a right is created in favour of some person’. The transfer should  be unrestricted and in good faith. Therefore, a negotiable instrument is a document guaranteeing the payment of a specific amount of money, either on demand, or at a set time, with the payer named on the document. It is an indebtedness to pay an amount and the negotiable instrument is an unconditional guarantee for the same. Some Examples of egotiable instruments are !romissory notes, "he#ues, $ills of Exchange,  bearer bonds, ban% notes etc. The Indian law on egotiable instruments is governed by the egotiable Instruments &ct of '(('. About the Act

The egotiable Instruments &ct '((' was passed in '(() and was amended in '*(* and )++), $efore '*(( there was no provision to restrain the person issuing the "he#ue "he#ue without  without having sufficient funds in his account. The only remedy against a ishonoured che#ue was che#ue  was a civil liability accrued. In order to ensure promptitude and remedy against the defaulters of the  egotiable Instrument a criminal remedy of penalty was inserted in egotiable Instruments &ct, '((' by amending it with egotiable Instruments &ct, '*((. The second noteworthy amendment was when the parliament enacted the egotiable Instruments -&mendment and iscellaneous !rovisions/ &ct, )++) which is intended to plug the loopholes. This amendment &ct inserts five new sections from '01 to '02 touching various limbs of the  parent &ct. This act is applicable to the whole of India including the state of 3ammu and 4ashmir, which was brought under the purview of the act in '*56. Objective

The ob7ective of the act is to define the various negotiable instruments such a, promissory notes, bills of exchange, che#ue etc. &lso to prescribe the liability in case of a failure of the instrument to fulfill its debt due to the default on the part of the payer or to curb scrupulous  practices adopted to escape liability in respect of negotiable instruments. 8owever, Section '1( in regard to dishonor of che#ue attracts criminal liability. Law on Negotiable Instrument, Instrument, Section 138

It is manifest that to constitute an offense under Section '1( of the &ct9 the following ingredients are re#uired to be fulfilled:'; fulfilled:'; '.

a per perso son n mu must hav have dra drawn wn a ch che#u e#ue on on an an acc acco ount main mainta tain ined ed by him him in a ban ban% % for payment of a certain amount of money to another person from out of that account ). the che#ue che#ue should should have been been issued issued for the dischar discharge, ge, in whole whole or in part, of of any debt debt or other liability9 1. that che#ue che#ue has been been presented presented to ban% within within a period period of of three months months from from the date date on which it is drawn or within the period of its validity whichever is earlier9

0. that che#ue is returned by the ban% unpaid, either because of the amount of money standing to the credit of the account is insufficient to honour the che#ue or that it exceeds the amount arranged to be paid from that account by an agreement made with the ban%9 5. the payee or the holder in due course of the che#ue ma%es a demand for the payment of the said amount of money by giving a notice in writing, to the drawer of the che#ue, within 1+ days of the receipt of information by him from the ban% regarding the return of the che#ue as unpaid9 6. the drawer of such che#ue fails to ma%e payment of the said amount of money to the  payee or the holder in due course of the che#ue within '5 days of the receipt of the said notice9 To put it in simpler terms the law stated that the person must owe some amount of money to another and draws a che#ue in that regard to fulfil that liability, the che#ue be drawn on an account in a ban% by him. The che#ue was then presented to the ban% within 1 months of the date on which it is drawn. 8owever due to insufficiency of funds the che#ue is returned by the ban% unpaid. The payee -the ban%/ ma%es a demand for payment of said amount which the person owed within 1+ days of the information received by him -the person who owed the money/ that the che#ue was returned unpaid9 and thereafter the person fails to pay the amount within '5 days of the notice by the ban%.

Cheque Bounce Notice Format Cheque bounce or cheque non-payment in a serious ofence in India punishable with imprisonment or ne under Section 138 o the Neotiable Instruments !ct" In case o  cheque bounce# a cheque beneciary must present the cheque issuer with a cheque bounce notice under section 138 within 3$ days o return o the cheque to protect his%her rihts under Section 138 o the Neotiable Instruments !ct" Cheque bounce notice is a rm and serious intimation to the cheque issuer that the cheque beneciary will proceed with leal action i payment or the cheque is not made immediately" &or a cheque bounce notice to be 'alid# it must contain reerence to Section 138 o the Neotiable Instruments !ct# inormation about when the cheque was presented# the reason or non-reali(ation o  payment and a request to the cheque issuer to arrane or payment immediately throuh alternate means" ! Section 138 Notice must be presented to the cheque issuer within 3$ days o return o cheque due to be 'alid"

When Cheque Bounce Notice Can Be Issued  )o issue a cheque bounce notice and et leal recourse# the ollowin conditions must be satised*

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)he cheque must ha'e been pro'ided towards a liability"

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)he cheque should ha'e been presented by the beneciary within a period o + months o its 'alidity"

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)he cheque must ha'e been returned by the ban, due to insucient unds"

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)he payee ma,es a demand or the payment by i'in a cheque bounce notice in writin# within 3$ days o the receipt o inormation by him rom the ban, that unds are insucient"

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)he cheque drawer ails to ma,e payment o the said amount o money within 1. days o the receipt o the cheque bounce notice"

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/eal action is initiated within one month o the date on which the cause-o-action arises"

Initiating Legal Action for Cheque Bounce )he ollowin steps must be ollowed to issue a cheque bounce notice and ta,e leal action*

1" Cheque bounce notice must be issued by the payee to the deaulter# within 3$ days o dishonor o cheque# by reistered post 0or Speed ost2 ac,nowledement due" )he cheque bounce notice must be proper ormat# with inormation li,e nature o transaction# amount# date o cheque deposit# date o cheque bounce# reason or cheque bounce and request to ma,e payment within 1. days" " I the cheque deaulter ails to ma,e payment within 1. days o cheque bounce notice# the payee should le a criminal case in a court within 3$ days rom the e4piry o notice period o 1. days" Cheque bounce complaints must be led in a court in the city where the cheque was presented" 3" 5nce the case is led# the court will hear the case and issue summons under Section 138 o the Neotiable Instruments !ct" 6" )he cheque deaulter would then ha'e to submit surety and appear beore the Court or resolution o the matter"

Section 138 of Negotiable Instruments Act  138" 7ishonour o cheque or insuciency# etc"# o unds in the account"

here any cheque drawn by a person on an account maintained by him with a ban,er or payment o any amount o money to another person rom out o that account or the dischare# in whole or in part# o any debt or other liability# is returned by the ban, unpaid" either because o the amount o money standin to the credit o that account is insucient to honour the cheque or that it e4ceeds the amount arraned to be paid rom that account by an areement made with that ban,# such person shall be deemed to ha'e committed an ofence and shall# without pre9udice" to any other pro'ision o this !ct# be punished with imprisonment or a term which may e4tend to one year# or with ne which may e4tend to twice the amount o the cheque# or with both* ro'ided that nothin contained in this

section shall apply unless*

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)he cheque has been# presented to the ban, within a period o si4 months rom the date on which it is drawn or within the period o its 'alidity# whiche'er is earlier:

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)he payee or the holder in due course o the cheque as the case may be# ma,es a demand or the payment o the said amount o money by i'in a notice# in writin# to the drawer o the cheque# within teen days o the receipt o inormation by him rom the ban, reardin the return o the cheque as unpaid: and

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)he drawer o such cheque ails to ma,e the payment o the said amount o money to the payee or# as the case may be# to the holder in due course o the cheque# within teen days o the receipt o the said notice" ;4planation"-&or the purposes o this section#