A legal notice under Section 138 of the Negotiable Instruments Act (N.I. Act) is a formal communication sent by a payee to the drawer of a dishonored cheque. It serves as a preliminary step in addressing cases of dishonored cheques due to insufficient funds or other reasons, and it sets the stage for potential legal action.
In such cases, the payee must first issue a legal notice to the drawer of the bounced cheque, demanding payment of the cheque amount within a stipulated time frame, which is usually 15 days as per the N.I. Act. The notice typically includes the following elements:
- Particulars of the Cheque: The legal notice specifies the details of the dishonored cheque, such as the cheque number, date, and the amount.
- Demand for Payment: It demands the drawer to make the payment within the stipulated time, which is typically 15 days from the date of receiving the notice.
- Consequences of Non-Payment: The notice warns of potential legal consequences if the payment is not made within the specified time frame.
- Filing a Criminal Complaint: If the drawer fails to comply with the notice’s demand for payment, the payee has the right to file a criminal complaint under Section 138 of the N.I. Act.
- Legal Action: The notice states that if the drawer does not resolve the matter by paying the due amount, a legal case may be filed against them, which could result in penalties, fines, or imprisonment.
The issuance of a legal notice serves as a crucial step in the process of recovering a dishonoured cheque amount. It not only informs the drawer about the situation but also provides them with an opportunity to rectify the matter. If the drawer fails to comply with the legal notice, the payee may proceed with legal action to seek redress and recover the due amount as per the provisions of the Negotiable Instruments Act.