Demand notice under Section 138 of the Negotiable Instruments Act, 1881

Where a cheque given to discharge a debt or other liability is returned unpaid, Section 138 treats the drawer as having committed an offence — but only if the three clauses of the proviso to that section are all satisfied, and the second of them is a written demand made to the drawer. Until that demand is made and the period in clause (c) has run, no offence under Section 138 has arisen and there is nothing a court can take cognizance of. The notice is therefore a step the section itself creates, and the four things below are the only things the section says about it.

What such a document contains

It is in writing
The demand is made by giving a notice in writing. An oral demand, however clearly made, does not satisfy clause (b)Clause (b) of the proviso to Section 138, Negotiable Instruments Act, 1881
It is addressed to the drawer of the cheque
The notice is given to the drawer — the person who drew the cheque on their own account — and it is the payee or the holder in due course who gives itClause (b) of the proviso to Section 138, Negotiable Instruments Act, 1881
It demands payment of the amount of the cheque
What clause (b) requires is a demand for payment of the said amount of money, which is the amount of the dishonoured cheque itself. Any further sum is not what the clause is aboutClause (b) of the proviso to Section 138, Negotiable Instruments Act, 1881
It is made within thirty days of the bank's information
Clause (b) allows thirty days for the demand, counted from the receipt of information from the bank that the cheque has been returned unpaid — not from the date on the cheque and not from the date of presentationClause (b) of the proviso to Section 138, Negotiable Instruments Act, 1881
What the cheque was given for
Section 138 opens only where the cheque was drawn for the discharge, in whole or in part, of a debt or other liability, which is why such notices set out what the cheque was issued against. The section states that as a condition of the offence and states nothing about the notice reciting itConvention rather than law
The particulars of the cheque
The cheque number, its date, the amount, and the bank and branch it was drawn on. Nothing in Section 138 or Section 142 requires them to appear in the notice; such notices identify the cheque this way in practiceConvention rather than law
The return memo and the reason on it
The date the bank returned the cheque and the reason it printed. The thirty-day period runs from information of the return reaching the payee, so the date matters to the arithmetic — but the section does not require the memo to be described in the noticeConvention rather than law
How and where it was sent
The address it was sent to and the mode of dispatch. The period in clause (c) runs from receipt of the notice, so when and whether a notice reached the drawer is a question that arises later; nothing in either section prescribes a mode of sendingConvention rather than law

The periods that attach to it

  • The demand under clause (b) is made within thirty days of the receipt of information from the bank that the cheque was returned unpaid — Clause (b) of the proviso to Section 138, Negotiable Instruments Act, 1881
  • After the notice reaches the drawer, clause (c) allows a fixed period for payment of the cheque amount. — Clause (c) of the proviso to Section 138, Negotiable Instruments Act, 1881
  • A court takes cognizance of an offence under Section 138 only on a complaint in writing by the payee or the holder in due course, made within the period Section 142 allows from the day that cause of action arises. — Section 142, Negotiable Instruments Act, 1881

Not established

  • Clause (a) of the proviso to Section 138 requires the cheque to have been presented within six months of the date it was drawn or within the period of its validity, whichever is earlier. The period of validity of a cheque is fixed by banking practice and by the instrument, not by the Act, and it has been shorter than six months for many years. Which of the two periods applied to a particular cheque is not established here.
  • The period in clause (c) runs from receipt of the notice by the drawer. When a notice sent to an address is treated as received — and what happens where it is refused or returned undelivered — is settled by law outside these two sections and by the facts of the sending. No rule for it is stated here.

What this guide is not

Of the points listed below, four are fixed by the Negotiable Instruments Act, 1881 itself and four are convention — such documents carry them, and no provision read for this section requires them. This is a description of a kind of document and not a document — confirm the contents of any document in a particular matter with an advocate.

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