This document summarizes key aspects of Section 138 of the Negotiable Instruments Act 1882 in India regarding dishonored checks. It defines relevant terms like checks, dishonor, truncation. Section 138 makes the drawer of a check criminally liable if the check bounces due to insufficient funds. A legal notice must be served to the drawer within 30 days of the check bouncing, demanding payment within 15 days, or criminal prosecution can be initiated. The document outlines essential information that must be included in a legal notice served under Section 138, such as names and addresses of claimant and recipient, check details, reason for dishonor, and warning of legal action.

1. z
Legal Notice U/S 138 of
NI Act 1882
ABHIJITH HS
P232701
1ST YEAR LLLM

2. z
Synopsis
 Introduction
 Terms
 Section 138 of NI Act
 Essentials of legal notice

3. z
Introduction
 Negotiable Instrument Act 1882 was enacted on March 1,1881
 In England, Sir McKenzie Chalmers drafted a bill on the subject –
passed the Bills of Exchange Act, 1882
 In India, in 1867,third Indian Law Commission prepared a bill.
 In 1879 Mr. Arthur Phillips, the then Law Secretary and a member
of the Calcutta Bar, redrafted the bill. Criticisms were invited on it
from banks & chambers of commerce. This bill, after passing
through Select Committees, was again referred to a new Law
Commission in 1879. finally passed, the Negotiable Instruments
Act, 1881.

4. z
Terms
 Sec.6 Cheque -A “cheque” is a bill of exchange drawn on a specified banker
and not expressed to be payable otherwise than on demand.
 It includes the electronic image of a truncated cheque and a cheque in the
electronic form
 Cheque in the electronic form-
 a cheque drawn in electronic form by using any computer resource
 signed in a secure system with digital signature (with or without biometrics signature)
and asymmetric crypto system or with electronic signature.
 Truncated cheque- a cheque which is truncated during the course of a clearing
cycle, either by the clearing house or by the bank whether paying or receiving
payment, immediately on generation of an electronic image for transmission,
substituting the further physical movement of the cheque in writing.

5. z
 Dishonour of cheque-A cheque falls under the dishonoured category when
a payee cannot successfully deposit the payer's cheque.
Two types of dishonour-
 Sec. 91. Dishonour by non-acceptance.—A bill of exchange is said to be
dishonoured by non-acceptance when the drawee, or one of drawees, makes
default in acceptance upon being duly required to accept the bill, or where
presentment is excused and the bill is not accepted. Where the drawee is
incompetent to contract, or the acceptance is qualified the bill may be treated
as dishonoured.
 Sec. 92. Dishonour by non-payment.—A promissory note, bill of exchange or
cheque is said to be dishonoured by non-payment when the maker of the
note, acceptor of the bill or drawee of the cheque makes default in payment
upon being duly required to pay the same.

6. z
 Cheque Return Memo- The cheque return memo
is a memo informing the payee's banker and the
payee about the dishonour of a cheque.
 Period of limitation: Within 30 days from the date
of dishonour of cheque ,payee can issue legal
notice to the drawer
within 15 days from the date of receipt of
notice, the drawer is liable to pay

7. z What is section 138 0f NI Act 1882
 138. Dishonour of cheque for insufficiency, etc., of funds in the account.—
 Where any cheque drawn by a person on an account maintained by him with a banker
for payment of any amount of money to another person from out of that account for the
discharge, in whole or in part, of any debt or other liability, is returned by the bank
unpaid, either because of the amount of money standing to the credit of that account is
insufficient to honour the cheque or that it exceeds the amount arranged to be paid from
that account by an agreement made with that bank. Imprisonment for a term extended to
two years, or with fine extend to twice the amount of the cheque, or with both
Exceptions:
 (a) the cheque has been presented to the bank within a period of six months from the
date on which it is drawn or within the period of its validity, whichever is earlier; (b) the
payee or the holder in due course of the cheque, makes a demand for the payment by
giving a notice; in writing, to the drawer of the cheque, within thirty days of the receipt of
information by him from the bank regarding the return of the cheque as unpaid; and (c)
the drawer of such cheque fails to make the payment of the said amount of money to the
payee or, to the holder in due course of the cheque, within fifteen days of the receipt of
the said notice

8. z
Essentials in legal notice U/S 138 of NI
Act 1882
 Name and address of the claimant and receipient
 Start with the words ‘Under instructions from my client ..( client
full address)….,I hereby issue to you the following notice ’
 Cheque number ,Drawn date, Bank name, endorsement date,
cheque return memo date, reason for return of cheque, request
to pay, legal actions intent to take on failure

9. z
Thank You