This article is written by Roshni Agarwal from Amity Law School, Noida
Legal Notice under Section 138 of Negotiable Instruments Act, 1881
Section 138 of the Negotiable Instruments Act, 1881 deals with the punishment of dishonour of cheques. It includes bills of exchange, promissory notes and cheques. A case can be filed under Section 138 of the Negotiable Instruments Act, 1881 when a drawer fails to discharge his liability. Civil as well as criminal proceedings can be initiated against the drawer under Section 138 of the Negotiable Instruments Act, 1881. The civil suit can be filed to recover the amount from the drawer i.e. double the amount of cheque and the criminal remedy can be sought for punishment i.e. imprisonment up to two years or both. But the dishonour of a cheque is not an offence in itself if a drawer pays the amount after receiving the legal notice.
A cheque is presented to the bank by the drawee within three months from the date of its issuing to withdraw the amount mentioned to the bank and if the cheque is bounced and returned by the bank along with a return memo stating the reason for the return i.e. insufficient funds or the amount to be paid by an account exceeds an amount mentioned in the agreement made with that bank. In such conditions, a person has committed an offence. In the case, M/S Laxmi Dyechem vs State Of Gujarat & Ors on 27 November 2012 it was held that insufficient funds include ‘closed accounts’, ‘referred to the drawer’ and ‘payment stopped’. In Shri Alloys Steel Ltd v. Jayaswala NECO Ltd, Supreme Court held that if the cheque is not presented within the period specified in the section then it would absolve the person from the criminal liability under Section 138 of the Negotiable Instruments Act, 1881.
There are some legalities involved while sending a legal notice under Section 138 of the Negotiable Instruments Act, 1881.
➢ Legal notice plays a major role while filing a case under Section 138 of the Negotiable Instruments Act, 1881. Every minute thing should be taken into consideration while drafting a legal notice.
➢ The date of drafting and sending a legal notice must be written on the legal notice as a time limit of 45 days would be counted from there.
➢ Legal notice must be sent to the drawer within thirty days of receipt of the return memo from the bank (Bodal Lal vs. Krishna Kuma, 2019). If fails to comply with the condition then a case under Section 138 of the Negotiable Instruments Act, 1881 cannot be filed. An ordinary civil suit can be filed for recovery.
➢ Legal notice must contain the name and address of the drawer of the cheque. If one has his/her contact number and alternative address mention them too. It brings the sense of surety that the legal notice has been received by the drawer.
➢ While drafting a legal notice (as an advocate on behalf of the client) mention all the details of the drawee including name, address, contact number and mention your details as well (advocate).
➢ Write the cause of action i.e. reason for filing the legal notice, details of the bank in which the cheque was presented, mention the cheque number, the date on which it was presented to the bank, date of return of cheque, photocopy of return memo.
➢ Write a prayer clause requesting the drawer to pay the amount immediately and mention the time limit of fifteen days from the date of receiving the legal notice to pay the amount (K.Bhaskaran v. Sankaran) If the drawer fails to pay the amount of cheque to the payee then legal proceedings can be initiated against the person under Section 138 of the Negotiable Instruments Act, 1881. If a drawer pays the amount within fifteen days after receiving the legal notice then stating the reason for delay then he has not committed any offence.
➢ Each page of the legal notice must be signed by the drawer as well as an advocate.
REFERENCES
1. https://cleartax.in/s/cheque-bounce-notice-format
2. K. Bhaskaran vs Sankaran Vaidhyan Balan And Anr on 29 September, 1999
3. https://indiankanoon.org/doc/529907/
4. https://indiankanoon.org/docfragment/85238030/?formInput=krishna%20kumar
5. https://blog.ipleaders.in/nature-section-138-negotiable-instruments-act-1881/
6. https://indiankanoon.org/doc/1823824/
Author: Roshni Agarwal,
Amity Law School, Noida, 1st year,