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Dishonour of Cheque Format India — Templates & Samples

Dishonour of Cheque documents are essential for recovering funds when a bank returns a cheque due to insufficient balance or account closure. Governed by Section 138 of the Negotiable Instruments Act, 1881, these drafts cover legal notices and court complaints. Download free Dishonour of Cheque templates and samples.

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What is Dishonour of Cheque?

Dishonour of Cheque refers to the legal offence committed when a cheque issued to discharge a legally enforceable debt or liability is returned unpaid by the bank due to insufficiency of funds, account closure, or exceeding the arranged limit. In India, this is strictly governed by Section 138 of the Negotiable Instruments Act, 1881.

For an offence under Section 138 to be established, several conditions must be met: the cheque must have been drawn for a debt, it must have been presented within six months or its validity period, and the bank must have returned it unpaid. The payee must then issue a written notice demanding payment within 30 days of receiving the bank's return memo. Under the proviso to Section 138, the drawer has 15 days from the receipt of the notice to make the payment.

If the drawer fails to pay within this 15-day window, the cause of action arises, and the payee can file a criminal complaint. The penalty under Section 138 includes imprisonment for up to two years, a fine up to twice the cheque amount, or both. Any payee or holder in due course of the cheque can initiate these proceedings. Understanding what is dishonour of cheque in Indian law is vital, as strict compliance with the procedural timelines under the Negotiable Instruments Act is mandatory for a successful prosecution.

When This Format Required?

Business Payments: When a vendor or supplier receives a cheque from a client for goods supplied or services rendered, and the bank returns it unpaid due to insufficient funds.

Loan Repayments: When an EMI cheque or a post-dated cheque given as security for a personal or business loan bounces, requiring the lender to initiate recovery.

Rental and Lease Payments: When a tenant’s rent cheque is dishonoured, and the landlord needs to issue a legal notice to recover the dues or seek eviction.

Settlement of Dues: When a cheque issued as a settlement for a prior dispute or outstanding debt is returned by the bank, compelling the payee to file a Section 138 complaint.

Corporate Transactions: When a company issues a cheque that bounces, requiring the payee to sue both the company and its directors under Section 141 of the NI Act.

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Quick Overview

Dishonour of Cheque cases in India are governed by Section 138 of the Negotiable Instruments Act, 1881. A legal notice does not require stamp paper, but the court complaint needs prescribed court fees. Notarisation is mandatory for the accompanying affidavit. Common uses include recovering bounced cheque amounts for business or loans. These documents typically range from 2 to 8 pages.

Step-by-Step Guide

  1. 1

    1. Collect the Cheque and Bank Return Memo

    Gather the original dishonoured cheque and the official bank return memo or advice slip. The memo must explicitly state the reason for dishonour, such as "insufficient funds" or "account closed," which is crucial evidence under Section 138 of the NI Act.

  2. 2

    2. Draft the Section 138 Statutory Notice

    Prepare a formal legal notice demanding payment from the drawer. Mention the cheque number, date, amount, and the reason for return. Explicitly demand payment within 15 days of receiving the notice, as mandated by the proviso to Section 138 of the Negotiable Instruments Act.

  3. 3

    3. Dispatch the Notice and Await the Period

    Send the notice via registered post with acknowledgment due (RPAD). Keep the postal receipt and tracking report safe. Wait for 15 days from the date the drawer receives the notice. If it is undelivered, wait 30 days from the date of dispatch.

  4. 4

    4. Draft the Criminal Complaint under Section 138

    If payment is not received, draft a formal criminal complaint. Detail the transaction, the cheque issuance, the bank's refusal, and the issuance of the statutory notice. Cite Section 138 and Section 141 (if the drawer is a company) of the Negotiable Instruments Act.

  5. 5

    5. Attach the Affidavit and Documentary Evidence

    Prepare a notarised affidavit verifying the complaint's facts. Attach all essential documents as annexures: the dishonoured cheque, bank return memo, copy of the legal notice, postal receipts, and delivery confirmation.

Disclaimer: This template is provided for general informational and drafting reference purposes only. It does not constitute legal advice. Stamp duty, registration, and procedural requirements may vary by state. Consult a qualified advocate before executing or filing any legal document. For more details, see our Disclaimer.