A Cheque is an essential instrument in business transactions. Transaction through cheque is one of the safest ways of managing business as it can be traced back if required. However, the only setback with the cheque is the chances of it getting dishonoured, which could be for technical reasons or because of the shortage of funds in the respective account. In the following article we are going to discuss the proper procedure to be followed to send a Legal notice under section 138 of the NI Act, in case of a cheque bounce-
Parties involved in transaction by a cheque-
Drawer- Customer or the account holder who issues the cheque
Drawee- Basically the Bank on which the cheque has been drawn, is called the ‘Drawee’.
Payee- The individual named in the cheque for getting the payment.
Cheque Bounce-
It is a term basically used to define the unsuccessful processing of a cheque due to various reasons. Non-sufficient funds in the account of the issuer is one of the major reasons for a bounced cheque. The following are some of the main causes of bounced checks:
Insufficient funds- if your account lacks funds from which the cheque has been issued, it would result in cheque bounce. Later, the issuer of the cheque has the option to either issue a new cheque or to resolve the issue with the receiver of the cheque.
Wrong date has been mentioned on the cheque- though seem as a small factor, however, it could cause serious issues for your cheque not getting processed. Any difference or problem with the date could lead to cheque dishonour. This may include disfigured or scribbled numbers.
Damaged cheque- several banks in India do not entertain disfigured cheques on which details are not visible. Also, your cheque could get bounced if it has stains or marks.
Mismatch of Signature- it is one of the most common reasons for cheque bounce. If a signature is mismatched or doesn’t match with the records of the bank, the cheque issued will be tagged as bounced cheque.
Legal Notice for a cheque bounce-
A legal notice for cheque bounce is generally sent by the advocate on behalf of his/her client as a result of the non- payment of the cheque. Sending a legal notice implies that the beneficiary of the cheque would proceed with a legal action if the payment for the cheque is not done immediately.
To issue a legal notice for cheque bounce the following conditions should be there-
The should be issued towards a liability
The cheque needs to be cashed again since the sum is insufficient.
The payee of the cheque could make a demand for the payment of the amount due by sending a notice in writing within 30 days of the receipt of the information by him/her from the banks that there are insufficient funds.
If the cheque drawer fails to provide satisfactory reply or payment of the said amount within 15 days of the receipt of legal notice for cheque bounce, legal action could be initiated within one month from the date when the legal notice was sent.
What if no legal notice was received ?
As per the provisions of the Negotiable Instruments Act, a notice must be sent within 30 days from the date of cheque bounce. Therefore, a case under Section 138 case if accused not received legal notice, however a summary suit could be initiated in such a situation by the aggrieved party thus starting the criminal proceedings under Section 420 of IPC within a period of 3 years.
Conclusion
From the above discussion it could be understood that a legal notice is sent to inform the party receiving the notice of the grievance faced by the sender as well as a last attempt to sort the issues out of court in a peaceful environment. Also, it must be mentioned here that, if a defective legal notice in 138 ni act or the notice does not fulfil the requirement under section 138 (b) of the NI Act, the complaint filed for cheque bounce would not be maintainable in law.
Before sending a legal notice it is advised to seek legal assistance from an experienced lawyer, as if the case does continue in the court, the legal notice sent would be an important document. Hence, if you wish to talk to a lawyer or seek free legal advice online, you may contact us at Lead India.
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