Advocate's Note: Quarries on Statutory Notice Under Negotiable Instrument Act

Advocate's Note: Quarries on Statutory Notice Under Negotiable Instrument Act

Advocate's Note: Quarries on Statutory Notice Under Negotiable Instrument Act

It is mandatory to issue statutory legal notice in cheque bounce cases. Law makes it compulsory to issue of legal notice in case of cheque bounce. When Cheque is returned by banker due to various reasons an intimation to be given to the drawer and give an opportunity to him to make the payment to the drawee.

Valid Notice is absolutely necessary in cheque bounce cases. We will analise the below situation :

1.Service of Valid Notice:

Unless the valid notice is not served by the drawee to the drawer complaint is not maintainable under negotiable instrument act of 1881 . law makes it compulsory to issue valid Legal Notice to the drawer of cheque . An Opportunity has to be provided to the drawer to make payment to the drawee.

2.Can the drawer of Cheque can demands Interest, Compensation, Incidental Expenses in the Notice.

There is no bar on drawee to demand interest, Compensation, incidental expenses in the Legal Notice. (Court Beat News) The Legal Notice will not become bad or invalid, if in the said notice states that, the principal amount demanded by payee of the cheque is correct and is clearly visible / identified in the Legal Notice.

3.Cheque amount is more than the legal enforceable debt:

When the legal enforceable debt is less than the amount written in the cheque . The Notice stating full value of cheque is become invalid notice. At the time of presenting the cheque the legal liability is less than the amount stated in cheque . 

For example the cheque bearing the amount 10,00,000/- and the drawer has paid Rs,2,00,000/- to the drawee if the Notice states amount payable by the drawer is Rs.10,00,000/- the notice will become invalid . At the time of presenting cheuqe there is no legal liability as on that date.

4) We can not present the cheuqe more than the legal enforceable debt. Even though the accused has given post dated cheque and if he makes any part payment if he makes any part payment the complainant cannot demand the full money. Even Though at the time of acceting there should be legally enforceable debt. 

The solution that we have to go for endorsement of cheuqe under section 56 of Act. But the banker is not knowing this section difficult for us to convince the bank manager. Even Legeal notice as per section 138 (b) we have to clearly state the reduced liabiality and we have o accept the money received from the accused and show the correct amount. The same point was held by Hon’ble Supreme Court in the case Dasharathbhai Trikambai Patel Vs Hitesh Mahendrabhai Patel & Ors case in Criminal Appeal No.1497 of 2022.

4.Service of Notice

The Drawee of Cheque should service the notice to the drawer within 30 days of the receipt of information by the complainant from the bank regarding the cheque is unpaid . Here the word “With in 30 days” is very important.

The drawee has to give 15 days time to the drawer of the cheque to make payment after service of Notice.

In the Legal Notice, the words in clause (b) of the proviso to Section 138 of the Act shoud be mentioned. the payee has the statutory obligation to "make a demand by giving notice".

The thrust in the clause is one the need to "make a demand." It is only the mode for making such demand, which the legislation has prescribed. A payee should send the notice for doing his/her part for giving the notice. Once the Legal Notice dispatched, his or her part is over and the next depends on what the sendee does.

The drawee has to file the complaint within 30 days to the magistrate after the expiry of 15 days from the date of receipt of notice by the drawer.

Section 138 of NI Act contemplates service of Notice and payment to be made within 15 days from the date of receipt of Notice. It does not speak about 15 days Notice.

The Legal Demand notice was held to be a valid notice under negotiable instruments act, although the accused was asked to make payment only within 10 days instead of 15 days.

5.Second Notice is valid ?

The drawee can present the cheque as long as it has validity . Cheque bounce compliant based on second statutory notice is issued after re presentation of cheque is maintainable . the drawee can present the cheque to bank and issued statutory notice first time to the drawer of the cheque has not made the payment and if the drawer represent the cheque and issued second statutory notice and filed compliant is maintainable as per the decision of Apex Court in the case of 2013 ((1) SCC 177 MSR Leathers vs. S. Palaniappan and Another case.

6.Common Notice is Valid ?

Where more than one cheques are dishonored and one common notice under Section 138 of N.I.Act 1881 is issued, can it be said that it will constitute only one offence? and / or there would be only one 'Cause of Action' ?

... the act of 'Dishonour of cheques' constitutes different offences and different 'Cause of Action'. Merely because common notice was issued by the drawer in due course, it cannot be said that there is only one cause of action. Each dishonour of cheque has different 'Cause of Action' for different individual offences.

7. Can Legal heir of payee issue demand notice and prosecute the case

The Legal Heir can proceed to issue notice and prosecute the case. On the death of Payee, his legal heirs steps into shoes of the payee for all practical purposes and such person can also file and prosecute compliant after completing legal formalities.

Article by: Jagadish A. ,Advocate 

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