Cheque Bounce Notice – An Overview

A Cheque bounce notice is a legal document sent by the payee to the drawer when the bank dishonours a cheque due to any one of the reasons, such as insufficient funds, signature mismatch, or any other discrepancy pointed out by the bank. The cheque bounce notice is managed according to Section 138 of the Negotiable Instruments Act, of 1881. This notice must be issued within 30 days of receiving the Cheque Return Memo from the bank.

The Cheque bounce notice under Section 138 notifies the drawer that the cheque has been dishonoured and that the stipulated amount payable as per the cheque must be paid within 15 days of receiving the notice. In case the drawer fails to adhere to the notice and comply, the payee is entitled to file a complaint against the drawer in court. The complaints, however, must be filed within one month after the expiry of the 15 days.

The cheque bounce notice gives the drawer one chance to settle the payment before a legal case or monetary penalty is processed. Cheque dishonour can attract a fine up to twice the amount mentioned in the cheque, while imprisonment can be up to two years. In some cases, the drawee is penalised with both.

How to Write a Cheque Bounce Notice?

Since a cheque dishonour notice holds legal consequences, it must comply with the legal framework and include all necessary elements to meet lawful requirements. Besides, it should communicate the message effectively to the drawer, explaining the implications of ignoring and breaching.

To learn how to write a cheque bounce notice, one must get a reference from an advocate or a legal professional. One must refer to a cheque bounce notice template before sending one to the drawer. Let us look at the essentials of how to write a cheque bounce notice under Section 138 below:

1. Sender’s Details – A cheque dishonour notice must include the sender’s name, address and contact information, in this case, the drawer.
2. Recipient’s Details A cheque bounce notice must include the recipient’s name, address, and contact information, which, in this case, is the payee.
3. Date – A cheque bounce notice must include the date on which the notice is being sent.
4. Subject – A cheque bounce notice must include a clear and concise subject line for effective communication, such as “Notice of Dishonour of Cheque.”
5. Details of Dishonoured Cheque – A cheque bounce notice must include details of the dishonoured cheque, such as the cheque number, date of issuance, bank name, branch name and the amount for which it was issued.
6. Statement of Dishonour A cheque bounce notice must visibly indicate that the cheque issued by the drawer has been dishonoured by the bank through a clear statement. The statement should also specify the exact reason given by the bank for dishonouring (e.g., insufficient funds or signature mismatch).
7. Demand for Payment – A cheque bounce notice must request payment of the cheque amount within 15 days of receiving the notice. This must be done as a warning settlement or face legal action under Section 138 thereafter.
8. Cheque Bounce Consequences – A cheque bounce notice must contain a statement informing the drawer of the legal consequences if he fails to settle the cheque amount within 15 days of the issuance of the notice under Section 138 of the Negotiable Instruments Act, 1881.
9. Signature – A cheque bounce notice must include the signature of the sender/payee alongside their name and designation (if applicable).