Legal Notice for Cheque Bounce on a Friendly Loan - Section 138 NI Act Format
An updated format for demanding payment when a cheque issued towards repayment of a friendly loan or other legally enforceable debt is dishonoured. The page explains the statutory notice timeline under Section 138 of the Negotiable Instruments Act, 1881 and the possible civil recovery route.
Section 138 NI Act: important requirements before issuing the notice
Section 138 applies where a cheque is drawn for discharge, wholly or partly, of a legally enforceable debt or other liability and is returned unpaid for a reason covered by law. For present-day banking practice, cheques are ordinarily required to be presented within three months from the date of the instrument.
- The cheque should represent a legally enforceable debt or liability.
- The payee or holder in due course must send a written demand notice within 30 days from receiving information from the bank regarding dishonour.
- The notice should make a clear demand for payment of the cheque amount.
- The drawer has 15 days from receipt of the notice to make payment.
- If payment is not made within that period, the cause of action for a complaint under Section 138 arises, subject to Section 142 and other applicable provisions.
Updated legal notice format for cheque dishonour relating to a friendly loan
Subject: Demand for payment of ₹____________ being the amount of dishonoured cheque no. __________ dated __________ issued towards discharge of a legally enforceable debt arising from a friendly loan.
Sir/Madam,
Under instructions and authority from my client Mr./Ms. ______________________, son/daughter/wife of ______________________, residing at ______________________, I hereby serve upon you the following legal notice:
1. That you approached my client on or about __________ seeking a friendly loan for ______________________ and represented that the amount would be repaid within the agreed period.
2. That, relying upon your request and assurance, my client advanced an aggregate sum of ₹____________ to you between __________ and __________ by ______________________ [bank transfer/cheque/other lawful mode].
3. That the said amount was advanced as a loan and became repayable on __________ / on demand in accordance with the understanding between the parties.
4. That, where applicable, you executed a promissory note dated __________ acknowledging your liability to pay ₹____________ together with agreed interest at the rate of __________, subject to applicable law.
5. That, where applicable, the parties also executed a written agreement dated __________ recording the loan transaction, repayment terms and the outstanding liability.
6. That despite repeated requests and reminders, you failed to repay the amount when it became due.
7. That towards discharge, wholly or partly, of the subsisting debt/liability, you issued the following cheque(s) in favour of my client:
| Cheque No. | Date | Bank / Branch | Amount |
|---|---|---|---|
| __________ | __________ | __________ | ₹__________ |
8. That my client presented cheque no. __________ dated __________ for ₹____________ through his/her banker within its validity period.
9. That the said cheque was returned unpaid by the bank vide return memo dated __________ with the reason "________________________". My client received information of the dishonour on __________.
10. That the dishonoured cheque had been issued towards discharge of a legally enforceable debt/liability payable by you to my client.
11. Accordingly, through this notice, you are hereby called upon to pay to my client the cheque amount of ₹____________ (Rupees ______________________________ only) within 15 days from the date of receipt of this notice.
12. You are further called upon, without prejudice to the above statutory demand, to pay such contractual or legally recoverable interest of ₹____________ / interest at __________ from __________, together with lawful notice expenses and other recoverable sums, if applicable.
13. If you fail to pay the cheque amount within 15 days from receipt of this notice, my client shall be entitled to initiate appropriate proceedings under Section 138 read with Section 142 and other applicable provisions of the Negotiable Instruments Act, 1881, at your risk as to costs and consequences.
14. My client also reserves the right to institute appropriate civil recovery proceedings, including a summary suit under Order XXXVII of the Code of Civil Procedure, 1908 where the claim falls within that procedure, or such other recovery proceedings as may be maintainable in law.
15. If the facts independently disclose any other civil or criminal wrong, my client reserves all remedies available under the law in force. Nothing in this notice shall be treated as an allegation of any separate criminal offence unless the necessary legal ingredients are independently established by the facts.
This notice is issued without prejudice to all other rights and remedies available to my client in law and equity.
A copy of this notice is retained in my office for record and further necessary action.
________________________
Advocate
Enrolment No.: __________________
Friendly loan recovery and Order XXXVII CPC
A Section 138 complaint and a civil recovery claim are distinct remedies. Depending on the documents and the nature of the debt, the lender may also pursue recovery of the outstanding amount, interest and permissible costs through a civil suit, subject to limitation, jurisdiction and proof.
Order XXXVII CPC provides a summary procedure for specified classes of suits, including suits on bills of exchange, hundies and promissory notes, and certain suits seeking recovery of a debt or liquidated demand arising from a written contract, an enactment or a guarantee. It should therefore be referred to only when the particular friendly-loan claim actually falls within those categories.
Any rate of interest stated in the notice should reflect the parties' lawful agreement and the applicable law. The statutory demand under Section 138 should remain clearly identifiable as a demand for the cheque amount.
Official laws and regulatory references
Statutory provisions and limitation issues should be checked against the facts and the law applicable on the date of action. This template is intended for general legal information and drafting assistance and should be adapted before use.