A bounced cheque is not just a financial setback — under Indian law, it is a criminal offence. Section 138 of the Negotiable Instruments Act, 1881 makes the dishonour of a cheque (due to insufficient funds or exceeding the arrangement) punishable with imprisonment of up to two years, a fine of up to twice the cheque amount, or both.
If someone has given you a cheque that has bounced, you have the law firmly on your side — but only if you act within strict time limits. This guide tells you exactly what to do, step by step.
⚠ Time limit warning: You must send a legal notice within 30 days of receiving the cheque return memo from your bank. Missing this deadline kills your case under Section 138. Act immediately.
When Does Section 138 Apply?
Section 138 of the Negotiable Instruments Act applies when all of the following conditions are met:
- The cheque was issued for the discharge of a legally enforceable debt or liability (not a gift or donation)
- The cheque was presented to the bank within 3 months of the date on the cheque
- The cheque was returned unpaid due to insufficient funds or because the amount exceeds the arrangement with the bank
- The payee sent a legal demand notice within 30 days of receiving the return memo
- The drawer failed to make payment within 15 days of receiving the notice
Important: Section 138 does not apply if the cheque bounced due to a signature mismatch, stop payment instructions by the drawer, or a post-dated cheque presented too early. These situations require a different legal approach.
The Step-by-Step Legal Process
Cheque is Dishonoured
Your bank returns the cheque unpaid and issues a Cheque Return Memo stating the reason for dishonour. Collect this document — it is the starting point of your case.
Send a Legal Demand Notice
Within 30 days of receiving the return memo, you must send a written Legal Notice to the drawer demanding payment of the cheque amount. This notice must be sent via registered post or courier with acknowledgement. The notice should clearly state the cheque details, the reason for dishonour, and demand payment within 15 days.
Drawer's Window to Pay
The drawer has 15 days from receipt of your notice to make payment. If they pay within this period, the matter is settled. If they refuse, ignore, or deny, you may proceed to file a criminal complaint.
File a Criminal Complaint
If the drawer does not pay within 15 days, you must file a complaint under Section 138 before the appropriate Magistrate's Court within 30 days of the expiry of the 15-day notice period. The complaint must be accompanied by the original cheque, the return memo, and proof of notice delivery.
Trial & Order
The Magistrate summons the accused. Most cases settle at the summons stage once the accused realises the criminal consequences. If contested, the case proceeds to trial. Courts are empowered to award the cheque amount as compensation along with criminal punishment.
What Are the Penalties for the Accused?
Punishment under Section 138, NI Act
- Imprisonment of up to 2 years, or
- Fine of up to twice the cheque amount, or
- Both imprisonment and fine
- Courts may additionally order interim compensation of up to 20% of the cheque amount during the trial
- Upon conviction, courts routinely award the full cheque amount as compensation to the complainant
Which Court Has Jurisdiction?
Following a 2020 Supreme Court ruling, the complaint must be filed in the court within whose jurisdiction the bank branch of the payee (the person who received the cheque) is located. This was a significant change from the earlier position and is important to get right when filing.
Common Defences Raised by the Accused
It is important to be aware of defences the accused may raise so your lawyer can anticipate and counter them:
- "The cheque was given as security, not for payment" — the accused may claim the cheque was a security deposit rather than a payment. Your lawyer must establish the debt with supporting documentation.
- "I never received the legal notice" — this is why sending the notice by registered post with acknowledgement due (RPAD) is critical. If the notice is returned undelivered after a genuine attempt, the law still deems it served.
- "The signature is forged" — in such cases, the dispute may also involve a fraud claim. Expert handwriting analysis may be required.
- "The cheque was stolen / obtained by fraud" — the accused must prove this claim.
Civil Remedy: Recovery Suit
In addition to or instead of a Section 138 criminal complaint, you may also file a civil suit for recovery of the cheque amount with interest. A civil suit allows you to attach the debtor's assets. Many creditors pursue both simultaneously for maximum pressure.
BSA Legal regularly advises clients on whether to pursue the criminal route, civil route, or both — depending on the amount involved, the debtor's profile, and the strength of evidence.
Documents You Need
- Original dishonoured cheque
- Bank return memo (stating reason for dishonour)
- Copy of legal demand notice sent
- Proof of delivery of notice (postal receipt / courier tracking / acknowledgement)
- Any supporting documents proving the underlying debt (invoice, agreement, loan document, etc.)
BSA Legal handles cheque bounce cases from legal notice to court proceedings. We offer fast turnaround on legal notices and have extensive experience before the Delhi courts in Section 138 matters. Get in touch for a free consultation →
Frequently Asked Questions
What if the cheque was post-dated?
A post-dated cheque is fully covered under Section 138 — provided it was issued for a legally enforceable debt. Present it only on or after the date on the cheque, and within 3 months of that date.
Can the case be settled out of court?
Yes. The vast majority of Section 138 cases are settled through compounding — the accused pays the cheque amount (often with interest and legal costs) and the complaint is withdrawn. Courts actively encourage settlement in cheque bounce cases.
What if the cheque drawer is a company?
Under Section 141 of the NI Act, if the accused is a company, every person who was in charge of and responsible for the conduct of the business at the time of the offence is also deemed guilty. Directors and officers can be personally prosecuted.
Is there any time limit to file the complaint?
Yes — the complaint must be filed within 30 days of the expiry of the 15-day notice period. This is a strict limitation and courts have very limited power to condone delays. Act swiftly.