In short: When a cheque is returned unpaid, the payee must send a formal cheque bounce notice to the drawer within 30 days of receiving the bank’s memo. If the drawer does not pay within 15 days of receiving that notice, the payee can file a criminal complaint under Section 138 of the Negotiable Instruments Act, 1881.
Key points
- Section 138 of the Negotiable Instruments Act, 1881 (NI Act) makes dishonour of a cheque a criminal offence punishable with imprisonment up to two years, a fine up to twice the cheque amount, or both.
- The cheque bounce notice must be sent in writing within 30 days of the payee receiving the bank’s dishonour memo — this deadline is strict and missing it bars a criminal complaint.
- The drawer has 15 days from the date of receiving the notice to make the payment; only after this period expires without payment can the payee file a complaint.
- The complaint must be filed within one month of the day the 15-day repayment window ends — courts have limited power to condone delay beyond this.
- Cheque bounce cases are tried as criminal matters; since 1 July 2024, the procedural law governing these trials is the Bharatiya Nagarik Suraksha Sanhita, 2023 (BNSS), which replaced the Code of Criminal Procedure, 1973 (CrPC).
- Compounding (out-of-court settlement) is possible with the court’s permission at most stages of the proceedings.
What is Section 138 of the NI Act and why does it matter?
Section 138 of the Negotiable Instruments Act, 1881 creates a specific criminal offence when a cheque issued for the discharge of a legally enforceable debt or liability is returned unpaid by the bank — commonly called a cheque bounce.
Before this provision was introduced, a dishonoured cheque was only a civil dispute. Parliament made it a criminal offence to restore public confidence in cheques as a payment instrument. The threat of prosecution gives payees real leverage to recover their money quickly.
The offence is not automatic. Three procedural conditions — the notice, the waiting period, and the complaint deadline — must all be met before a court can take cognisance.
What are the conditions that must be met for Section 138 to apply?
Not every returned cheque triggers Section 138. The following conditions must all be satisfied:
- The cheque must have been drawn on a bank account in India.
- It must have been issued for the discharge of a legally enforceable debt or other liability — post-dated cheques given as security may or may not qualify depending on the facts; consult an advocate.
- The cheque must have been presented to the bank within its validity period (typically three months from the date on the cheque, as per Reserve Bank of India guidelines).
- The bank must have returned it unpaid — either for insufficient funds or because the amount exceeds the arrangement agreed with the bank.
What is the cheque bounce notice, and what must it contain?
The cheque bounce notice is a written demand sent by the payee (the person to whom the cheque was issued) to the drawer (the person who signed the cheque) after the bank returns the cheque unpaid.
The notice does not have a prescribed statutory format, but courts have consistently held that it must clearly communicate:
- That the cheque was presented and dishonoured.
- The amount involved and the cheque details (number, date, bank).
- A demand that the drawer pay the cheque amount within 15 days of receiving the notice.
Always send the notice by speed post or registered post with acknowledgement due (RPAD) so you have proof of delivery. Many advocates also send a copy by courier or email, but the postal record is the most legally reliable evidence.
If the notice is returned unserved because the drawer deliberately avoids it, courts have held in several decisions that service can still be deemed complete once the postal authorities have made a proper attempt at delivery. Verify the current position on this with your advocate, as the facts of each case matter.
What are the key deadlines in the Section 138 process?
The timelines under Section 138 are rigid. Missing any one of them can be fatal to your case.
| Step | Who acts | Deadline |
|---|---|---|
| Present cheque to bank | Payee | Within the cheque’s validity period (generally 3 months from cheque date) |
| Receive dishonour memo from bank | Payee | Date the clock starts for the notice |
| Send cheque bounce notice | Payee | Within 30 days of receiving the dishonour memo |
| Pay the cheque amount | Drawer | Within 15 days of receiving the notice |
| File criminal complaint (if no payment) | Payee | Within 1 month of the 15-day period expiring |
If the drawer pays within 15 days, the offence under Section 138 is not made out and no complaint can be filed. The payee may still pursue a civil remedy for any remaining dues, but the criminal route closes for that particular cheque.
How has the procedural law changed since 1 July 2024?
The substantive offence — Section 138 of the NI Act — remains unchanged. What changed from 1 July 2024 is the procedural law that governs how the case moves through court.
| Aspect | Old law (before 1 July 2024) | New law (from 1 July 2024) |
|---|---|---|
| Procedural code | Code of Criminal Procedure, 1973 (CrPC) | Bharatiya Nagarik Suraksha Sanhita, 2023 (BNSS) |
| Trial court jurisdiction | CrPC provisions on Magistrate courts | Equivalent BNSS provisions on Magistrate courts |
| Summons, bail, appeals | CrPC chapters | Corresponding BNSS chapters |
| Substantive offence | Section 138, NI Act, 1881 | Section 138, NI Act, 1881 (unchanged) |
Pending cases filed before 1 July 2024 broadly continue under the old CrPC procedure unless the court directs otherwise. If your case was filed or is being filed now, your advocate will apply the BNSS. Always confirm the applicable procedure with a qualified advocate.
Where is the complaint filed?
Section 142 of the NI Act specifies that the complaint is filed before a Judicial Magistrate of the First Class (or a Metropolitan Magistrate, as the case may be). The territorial jurisdiction provisions were amended in 2015 — broadly, the complainant can file in the court within whose jurisdiction the bank branch where the cheque was presented for collection is located. Verify the current position with your advocate, as jurisdictional nuances can affect strategy.
Can the matter be settled after a complaint is filed?
Yes. Section 147 of the NI Act makes the offence compoundable, meaning the payee and drawer can settle at any stage — even during appeal — with the court’s permission. In practice, many Section 138 cases are resolved by negotiation once proceedings begin, since the drawer faces the real possibility of imprisonment and a fine of up to twice the cheque amount.
Frequently asked questions
Can I send the cheque bounce notice by email or WhatsApp?
There is no specific statutory bar on electronic notice, but courts have most consistently accepted registered post (RPAD) or speed post as proof of valid service. Email and messaging apps can supplement but should not replace postal service. Consult your advocate before relying solely on digital modes, as the law on electronic service in this context is still evolving.
What happens if I miss the 30-day deadline to send the cheque bounce notice?
If you send the notice after 30 days of receiving the bank’s dishonour memo, the complaint will generally not be maintainable under Section 138 because one of the statutory conditions is not met. You may still have a civil remedy to recover the debt, but the criminal route under Section 138 will be closed. Act promptly and keep the bank’s return memo safe from the moment you receive it.
Is a cheque bounce case civil or criminal?
A Section 138 NI Act case is a criminal proceeding — the drawer can be sentenced to imprisonment and fined. However, the court can also direct payment of compensation to the payee under Section 357 of the BNSS (equivalent to the old Section 357 CrPC). You can also file a separate civil suit to recover the debt, and both proceedings can run simultaneously, though courts sometimes stay the civil suit pending the criminal outcome.
This article is for general information only and is not legal advice. Laws change; verify against the primary sources cited and consult a qualified advocate for your situation.
