Module 3 of 5 — Negotiable Instruments Act & Section 138

The Demand Notice: Drafting, Service, and Timelines

Reading module · approx 13 min

The demand notice under Section 138 is not just a formality — it is a mandatory ingredient of the offence. A defective notice can be fatal to the entire Section 138 complaint, regardless of the merits of the underlying dispute. Getting the notice right is essential.

The notice requirement

Section 138(b) requires that the payee or holder in due course, upon receiving information of dishonour from the bank, makes a demand within 30 days of receiving such information by giving written notice to the drawer. The notice must demand payment of the said amount of money.

Contents of the demand notice

The demand notice must contain:

Identification of the dishonoured cheque (date, amount, cheque number, drawee bank)
The reason for dishonour as stated in the cheque return memo
A demand for payment of the cheque amount
A clear deadline: the drawer must pay within 15 days of receipt of this notice
Notice that failure to pay will result in criminal proceedings under Section 138 of the NI Act

It is also advisable (though not strictly mandated) to attach or reference the cheque return memo to establish the factual basis of the dishonour.

Critical timelines

The timelines under Section 138 are a chain of interlocking requirements:

Cheque must be presented within 3 months of the date on the cheque
Upon dishonour, the bank issues a CRM; the payee receives intimation of dishonour
The demand notice must be sent within 30 days of receipt of intimation of dishonour — Day 0 is the date of receipt of the CRM
The drawer must pay within 15 days of receipt of the notice — Day 0 is the date the drawer receives the notice
If the drawer fails to pay, the payee must file the complaint within one month of the expiry of the 15-day period

The 30-day and 15-day clock The most common technical defect in Section 138 cases is miscounting the timelines. The 30-day period starts from the date the payee receives the bank's return memo, not the date of dishonour. The 15-day period starts from the date the drawer receives the notice, not the date of dispatch. Sending the notice even one day late makes the notice defective. Filing the complaint even one day after the one-month period (from expiry of the 15-day period) makes the complaint time-barred.

Mode of service of the notice

The demand notice can be served by any of the following modes:

Registered post with acknowledgement due (RPAD)
Speed post with tracking
Courier with delivery proof
Personal delivery with acknowledgement

Service by email alone is not accepted by most courts for Section 138 notices, unless supplemented by physical dispatch. The Supreme Court has held that notice sent by RPAD to the last known address of the drawer is deemed served, even if the notice is returned as "unclaimed" or "refused."

Who must send the notice

The notice must be sent by the payee (the person in whose favour the cheque is drawn) or the holder in due course (a person who acquired the cheque for consideration before maturity and without notice of any defect in the cheque). A bare assignee of a dishonoured cheque (after dishonour) cannot send a valid Section 138 notice.

Notice to companies: addressing the notice

Where the drawer is a company, the demand notice should be addressed to the company at its registered office address. In addition, the practitioner should consider sending copies of the notice to the directors who may be personally liable under Section 141 — this is not a legal requirement for the Section 138 offence itself, but it strengthens the Section 141 case against directors.

Module 4 covers filing the complaint — the procedure, jurisdiction, and evidence requirements.