Cheque bounce or cheque non-payment in a serious offence in India punishable with imprisonment or fine under Section 138 of the Negotiable Instruments Act. In case of cheque bounce, 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 Section 138 of the Negotiable Instruments Act. Cheque bounce notice is a firm and serious intimation to the cheque issuer that the cheque beneficiary will proceed with legal action if payment for the cheque is not made immediately. For a cheque bounce notice to be valid, it must contain 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. A Section 138 Notice must be presented to the cheque issuer within 30 days of return of cheque due to be valid.
Cheque bounce notice or Section 138 notice can be easily created using the Legalguidance . Once the document is created, it can be printed on a plain white paper or letterhead of the business and delivered to the cheque issuer. The cheque bounce notice must contain the name of the cheque beneficiary, check issuer name and address, date of return of cheque, reason for return of cheque, request to make arrangement for alternate payment immediate and the words that the notice is issued under Section 138 of the Negotiable Instrument Act. Its important to send the Cheque Bounce notice through registered post, so that the date of issuing notice can be recorded formally. One copy of the letter can be retained by the cheque’s beneficiary while the other copy is delivered to the cheque issuer through registered post.
To issue a cheque bounce notice and get legal recourse, the following conditions must be satisfied:
The following steps must be followed to issue a cheque bounce notice and take legal action:
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 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:
Explanation: For the purposes of Section 138 of Negotiable Instruments Act, “debt or other liability” means a legally enforceable debt or other liability.
If the person committing an offence under section 138 is a company, every person who, at the time the offence 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 offence 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 offence was committed without his knowledge, or that he had exercised all due diligence to prevent the commission of such offence.
Where any offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to, any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly.