What is Cheque Bounce (Section 138 NI Act)?
When a cheque is presented to the bank for payment and the bank returns it unpaid — due to insufficient funds, payment stopped by the drawer, account closed, signature mismatch, or amount mismatch — it is a "dishonoured cheque." Under Section 138 of the Negotiable Instruments Act 1881, dishonour of a cheque for insufficiency of funds or if the amount payable exceeds the amount arranged by the drawer is a criminal offence punishable with imprisonment up to 2 years, fine up to twice the cheque amount, or both.
In addition to the criminal remedy, the payee can also file a civil suit for recovery of the cheque amount. Most people pursue the criminal route first because it is faster, creates more pressure on the drawer, and the conviction rate is reasonable with proper documentation.
Step-by-Step Process — Cheque Bounce Action
Cheque presented and returned by bank
Present the cheque within its validity period (3 months from the date on the cheque — cheques are valid for 3 months). Collect the dishonour memo from the bank — the bank issues a "Return Memo" stating the reason for return. This memo is the foundation of your case. Keep the original cheque and original return memo safe — do not lose these documents.
Send the Section 138 Demand Notice — within 30 days of dishonour
Within 30 days of receiving the return memo from the bank, send a written demand notice to the drawer (the person who gave you the cheque) demanding payment of the cheque amount. The notice must be sent by registered post with acknowledgment due (RPAD) to the drawer's address. The notice should: clearly mention the cheque number, date, amount, and drawee bank; state that the cheque was returned due to insufficient funds (or the specific reason); demand payment within 15 days of receipt of the notice; and state that failure to pay will result in criminal proceedings under Section 138 NI Act.
Keep copies of: (a) the notice, (b) the postal receipt, and (c) the acknowledgment card returned by the post office. If the drawer refuses to accept or the notice is returned undelivered, keep all postal records — courts have held that properly sent notices are deemed served even if the drawer avoids receipt.
Wait 15 days after the drawer receives the notice
After the drawer receives the notice (or after a reasonable period if delivery is refused), wait for the drawer to make payment. The drawer has 15 days from receipt of the demand notice to pay the cheque amount. If the drawer pays within this 15-day window, the matter is settled and no further action is needed (though you should get the payment in writing). If the drawer does not pay within 15 days, the offence under Section 138 is complete and you can file a complaint.
File the complaint — within 30 days of expiry of 15-day window
After the 15-day period expires without payment, you have 30 days to file a criminal complaint under Section 138 NI Act before the appropriate Magistrate court. In Pondicherry, this is the Judicial Magistrate's court. The complaint must be filed in the court having territorial jurisdiction — typically where the cheque was presented for payment (i.e., where the payee's bank is located). Following the 2015 Supreme Court ruling (Dashrath Rupsingh Rathod v. State of Maharashtra), the complaint can be filed where: the cheque was presented, OR where the cheque was drawn, OR where the cheque amount was payable.
Court proceedings — summons, trial, judgment
After filing the complaint, the court issues summons to the accused (drawer). The accused appears and the trial proceeds. The complainant (payee) must prove: that the cheque was issued by the accused for legally enforceable debt, that the cheque was dishonoured, that proper demand notice was sent, and that payment was not made within 15 days. The accused can defend by proving: no legally enforceable debt existed, the cheque was given as security or gift (not for debt), or procedural defects in notice or filing.
Conviction, fine, or settlement
If convicted, the drawer faces imprisonment up to 2 years and/or fine up to twice the cheque amount. Courts also typically order payment of the cheque amount as compensation under Section 357 CrPC (now BNSS). Parties can compound (settle) the offence at any stage with the complainant's consent and the court's permission under Section 147 NI Act. Most cheque bounce cases end in settlement — the threat of criminal prosecution is the most effective tool to get payment.
Key Timelines at a Glance
| Action | Deadline | If Missed |
|---|---|---|
| Present cheque to bank | Within 3 months of cheque date | Cheque becomes stale, cannot be presented |
| Send demand notice to drawer | Within 30 days of receiving bank's return memo | Case barred — complaint not maintainable |
| Drawer's window to pay | 15 days from receipt of demand notice | Offence is complete; can file complaint |
| File complaint before Magistrate | Within 30 days of expiry of 15-day notice window | Complaint may be barred by limitation (courts can condone delay in exceptional cases) |
Documents You Need for the Complaint
- Original dishonoured cheque
- Bank's return memo (original)
- Copy of the demand notice sent to the drawer
- Proof of sending — postal receipt (registered post acknowledgment)
- Postal acknowledgment card (AD card) showing delivery to the drawer
- If delivery refused/returned: the envelope with the postal endorsement
- Evidence of the legally enforceable debt — agreement, invoice, ledger entries, WhatsApp messages acknowledging the debt
If You Receive a Section 138 Demand Notice
If you are the drawer and have received a Section 138 demand notice, act quickly:
Assess whether the debt is legitimate
Was the cheque given for a legally enforceable debt? Was it a security cheque, a gift, or given under duress? The answer determines your legal position. Even if the cheque bounced due to banking reasons, if the underlying debt is valid, your best course may be to negotiate a settlement.
Pay within 15 days if the debt is valid
If you owe the money, pay within 15 days of receiving the notice. Get a receipt. This ends the matter completely and avoids criminal conviction and the expense of court proceedings.
Consult an advocate immediately if you dispute the claim
If you dispute the existence of the debt, the amount, or the validity of the cheque, consult our advocates immediately. There are valid defences available — no legally enforceable debt, cheque given as security, procedural defects in notice — but these must be properly raised in court. Missing the 15-day window or the complaint timeline can affect your ability to raise certain defences.
Note: Section 138 NI Act creates a presumption of guilt in the accused's favour — once the complainant proves the basic facts (cheque, dishonour, notice), the burden shifts to the accused to disprove the existence of debt. This presumption makes the offence easier to prosecute and harder to defend without evidence.
Interim Relief — Section 143A and 148 NI Act
Two important provisions allow courts to order the drawer to pay money during the trial:
- Section 143A: At the first hearing, the court may (not mandatory) direct the drawer to pay interim compensation up to 20% of the cheque amount to the complainant. This amount is payable within 60 days. If the accused is acquitted, the court orders the complainant to refund the amount with interest.
- Section 148: In appeals against conviction, the appellate court shall direct the appellant to deposit a minimum of 20% of the fine or compensation awarded by the trial court as a condition of entertaining the appeal (with some exceptions).
These provisions were introduced in 2018 to reduce abuse of appeals as a delay tactic and to provide some immediate relief to cheque recipients during long-running trials.
Frequently Asked Questions
Yes. The criminal remedy under Section 138 NI Act and a civil suit for recovery are independent remedies. You can pursue both simultaneously. However, if you receive payment through one route, you must disclose this to the other court. It is generally not advisable to run both simultaneously due to cost and complexity — the criminal route is usually pursued first as it creates the most pressure. If the criminal case ends in acquittal on technical grounds (procedural defects in notice, etc.), the civil suit for recovery of debt can still proceed based on the underlying contract or transaction.
After the 2015 Supreme Court ruling in Dashrath Rupsingh Rathod, the complaint must be filed in the court having territorial jurisdiction where the cheque was presented at the bank (i.e., where the payee's bank is located). Since the payee's bank is in Pondicherry, you can file the complaint in Pondicherry regardless of where the drawer is based or where the cheque was drawn. The summons will then be issued to the drawer at their address. If the drawer is from outside Pondicherry, execution of the summons through other courts' assistance may be needed, but the trial stays in Pondicherry.
When a company issues a dishonoured cheque, liability under Section 141 NI Act extends to: the company itself, every person who was in charge of and responsible for the conduct of the business at the time of the offence, and the managing director or officers who consented to or connived at the commission of the offence. In practice, the authorised signatory who signed the cheque and the directors managing the company can be made accused. The company's account being insolvent is not a defence for the individuals responsible.
Section 143 NI Act mandates that cheque bounce cases be tried summarily (a faster procedure), and the trial must be completed within 6 months from the date of filing. In practice, high pendency in courts means this target is rarely met. To speed up: (1) file the complaint promptly, (2) ensure all documents are in order to avoid adjournments, (3) apply for Section 143A interim compensation early, (4) explore settlement through mediation or Lok Adalat — Lok Adalat settlements in cheque bounce cases are final and binding, cannot be appealed, and are much faster than trial. Our advocates actively use Lok Adalat referrals for clients where possible.
Cheque Bounce Issue? Act Within 30 Days
Don't miss the Section 138 deadline. Our advocates draft the demand notice, file the complaint, and represent you through the trial at Judicial Magistrate Court, Pondicherry.