A demand notice is a formal written communication from a creditor to a debtor demanding payment of a stated amount within a stated period, failing which legal proceedings will follow. Under Section 138 of the NI Act it is the 30-day notice after a cheque bounce; under Section 8 of the Insolvency and Bankruptcy Code it is the operational creditor's notice in Form 3 or 4 giving 10 days; in contract recovery it is the advocate's legal notice demanding dues and interest.
How demand notices work in India
The notice identifies the creditor and debtor, the basis of the debt (invoices, contract, cheque), the amount, interest, the period for payment and the consequence. It is served so that receipt can be proved. For Section 138 the content is governed by the proviso to the section; for IBC the Code prescribes Form 3 (demand notice) and Form 4 (notice with invoice), delivered to the registered office and by email to the directors. A debtor who disputes must do so within the period, and in IBC the existence of a genuine pre-existing dispute defeats the application.
Why it matters for getting paid
The demand notice fixes the amount and the date in writing. Whatever the debtor says afterwards is measured against it. In Section 138 and IBC matters, no notice means no case. In ordinary recovery it is still the moment most buyers pay, because it tells them the matter has moved to advocates. See legal notice for drafting detail, and Section 9 IBC demand notice for the insolvency route.
How FundRaksha uses it
Every FundRaksha matter starts with a demand notice from the dedicated advocate within 24 hours, tailored to the route: a Section 138 notice if there is a bounced cheque, a Section 8 notice if the buyer is a company and the debt exceeds ₹1 crore, or a contractual or MSMED notice otherwise. 700+ businesses have been paid through FundRaksha; the fee is 30% of what is recovered.
Worked example (hypothetical)
A Gurugram staffing agency is owed ₹1,20,00,000 by a corporate client under a signed services agreement, undisputed for eight months. Because the buyer is a company and the default exceeds ₹1 crore, the advocate sends a Section 8 IBC demand notice in Form 3 with the invoices, giving 10 days. The buyer neither pays nor raises a dispute. A Section 9 application is prepared for the NCLT. Faced with the prospect of insolvency proceedings, the buyer pays ₹1,20,00,000 in two tranches within 30 days and the application is not filed. Had the debt been ₹60,00,000, the IBC route would be unavailable and a commercial suit would follow instead.
Last reviewed: 2026-10-08. Information for Indian businesses; not legal advice.