Reply to a cheque-bounce notice: format and the defences that work

What this reply is

When a cheque you gave comes back unpaid, the person it was made out to — the payee — can send you a demand notice under Section 138 of the Negotiable Instruments Act, 1881. You, the person who signed the cheque, are the drawer. The notice gives you 15 days from receiving it to pay the cheque amount.

A reply is your written answer to that notice. No law makes you send one. But if the payee goes to court, the notice and your reply are among the first papers the court reads. A clear, honest reply sent in time is your side of the story on record before anything is filed.

If you have just received a notice and are not sure whether to pay, reply or settle, start with Got a cheque-bounce notice.

The defences that work

The law starts against you. Section 139 says the court will presume the cheque was given for a debt or liability unless you prove otherwise. A reply that holds up gives the facts that answer this presumption. The common ones:

• No debt was owed. The cheque was given for something that never became due, or the deal fell through. Section 138 covers only a cheque for a legally enforceable debt or liability.
• The debt was already paid, in full or in part, before the cheque was presented. Give dates and proof.
• The amount is wrong. The cheque was filled in for more than was owed.
• It was a security cheque, and nothing was due when it was presented. Courts have held that a security cheque can still found a case if the debt it secured had fallen due, so explain exactly what it secured and why nothing was owed.
• The notice itself is defective. For example, it was sent more than 30 days after the payee learnt the cheque bounced, the cheque was presented after its validity ran out, or the notice demands a different amount from the cheque.
• You were not in charge (company cheques). Under Section 141, a person in charge of the company's business is liable unless they prove the offence happened without their knowledge or that they took all due care to prevent it.

What is not a defence: under Section 140, that you had no reason to believe the cheque would bounce.

What the reply must say

• Your name and address, and the payee's, and the notice you are answering — its date and the date you received it.
• Your account of the cheque: number, date, amount, and what it was actually given for.
• What was paid, with dates and how.
• Your defences, one per paragraph, in plain words.
• A denial of what is wrong in the notice — but only what is wrong.
• What you ask for: that the demand be withdrawn, or what you are prepared to do.
• Date and signature.

Keep it to one or two pages. Every sentence in it can be read out in court.

A sample reply

This sample shows the shape. Replace everything in square brackets, and keep only the paragraphs that are true for you.

By registered post / speed post with acknowledgement due

Date: [date]

To,
[Payee's full name]
[Payee's address, or their advocate's address as given in the notice]

Subject: Reply to your notice dated [date] under Section 138 of the Negotiable Instruments Act, 1881 regarding cheque no. [number]

1. I, [your full name], resident of [your address], received your notice dated [date] on [date of receipt]. I reply to it as follows.

2. The cheque no. [number] dated [date] for Rs. [amount] drawn on [bank, branch] was given to you on [date] [as security for / towards] [describe what it was actually for].

3. [No amount was due from me when the cheque was presented, because [facts]. / I paid you Rs. [amount] on [date] by [mode], and Rs. [amount] on [date] by [mode]. Nothing remained due.]

4. [Your notice was sent on [date], more than 30 days after you received the bank's return memo on [date]. / Your notice demands Rs. [amount], which is not the amount of the cheque.]

5. I deny that I owe you the amount demanded. Every statement in your notice that is contrary to this reply is denied.

6. I call on you to withdraw the notice and to return the cheque to me. [I am willing to discuss the matter with you to settle any genuine dispute.]

[Signature]
[Your full name]

How to send it

By registered post or speed post with acknowledgement due, to the address on the notice. If an advocate sent it, send the reply to the advocate too. Keep the postal receipt, the tracking printout, and a signed copy. An email copy can go as well, but not instead.

Mistakes that sink the reply

• Admitting the debt by accident. "I will pay when I can" can be read as admitting you owe it. Say only what is true and intended.
• Making things up. A false defence, once disproved, damages everything else you say.
• Being vague. "Nothing is owed" without dates or proof carries little weight against the presumption.
• Sending it late, or by ordinary post with no proof.
• Threats or abuse. Keep the tone flat and factual.

What happens next

If you pay the cheque amount within the 15 days, the matter ends. If not, the payee has one month after the 15 days to file a complaint before a magistrate (Section 142). If you are summoned, you need an advocate on record: see Cheque-bounce complaint before the magistrate. A settlement is possible at any stage: see Compounding a cheque-bounce case.

eMunshi's reply to a cheque-bounce notice is drafted from your answers, checked and sealed by a panel advocate, and sent by registered post with tracking: ₹999, all-inclusive.