Commercial · 9 min read
Cheque bounce — Section 138 NI Act notice, complaint and trial
From dishonour memo to judgment — the timelines, drafting essentials, jurisdiction, evidence and likely outcomes in a Section 138 cheque-bounce complaint.
When a cheque issued in discharge of a legally enforceable debt or liability is dishonoured by the bank for insufficient funds or for exceeding the arrangement, an offence is made out under Section 138 of the Negotiable Instruments Act, 1881.
The remedy is quasi-criminal — the focus is on recovery of the cheque amount with compensation, supported by the deterrent of imprisonment. Most cases settle once the legal process is set in motion, often through court-annexed mediation.
Who this guide helps
Is this for you?
- Payees holding a dishonoured cheque issued by a customer, borrower, tenant or business counterparty
- Sellers of goods or services who have been paid by post-dated cheque
- Lenders against whom a borrower's repayment cheque has bounced
Governing law
Legal basis
- Section 138 NI Act — dishonour of cheque for insufficiency of funds
- Section 139 NI Act — presumption in favour of holder
- Section 142 NI Act — cognizance of offences
- Section 143A and 148 NI Act — interim and appellate compensation
- Dashrath Rupsingh Rathod v. State of Maharashtra & Indian Bank Assn. judgments — territorial jurisdiction
Step by step
The procedure
- 01
Obtain the bank return memo
On dishonour, your bank issues a return memo stating the reason. Preserve the original — it is the primary evidence. Common qualifying reasons: 'funds insufficient', 'exceeds arrangement', 'account closed', 'payment stopped by drawer' (where supported by underlying liability).
- 02
Issue a written demand notice within 30 days
Within 30 days from the date you receive the return memo, issue a notice to the drawer at the last known address by registered post and email. The notice must clearly demand payment of the cheque amount within 15 days.
- 03
Wait the statutory 15 days
Cause of action arises only after 15 days from receipt of the notice and non-payment. Track delivery via India Post / courier — refused or unclaimed notice is treated as deemed service.
- 04
File the complaint within the next 30 days
The complaint is filed before the jurisdictional Magistrate — the court within whose territorial jurisdiction the payee's bank branch (where the cheque was presented) is situated. Late filing requires a condonation application.
- 05
Pre-summoning evidence and summons
The complainant files a sworn statement (affidavit) and exhibits — cheque, return memo, notice, postal receipts. On satisfaction, the Magistrate summons the accused.
- 06
Plea, interim compensation and trial
On the accused's appearance, plea is recorded. Section 143A NI Act allows the court to direct interim compensation up to 20% of the cheque amount. If denied by the accused, evidence is recorded and arguments heard.
- 07
Judgment and remedies
On proof, the court can order compensation up to twice the cheque amount, with imprisonment up to two years. In appeal, Section 148 allows the appellate court to direct deposit of at least 20% of the awarded amount.
Checklist
Documents to keep ready
- Original cheque and the bank return memo
- Demand notice with proof of dispatch (RPAD / courier receipt) and delivery / refusal
- Bank statement showing presentation
- Underlying invoice / loan agreement / acknowledgment of debt
- Email correspondence and any acknowledgment of liability
What to expect
Indicative timeline
- Notice within 30 days of return memo; demand period 15 days
- Complaint filing within 30 days after the demand period
- Summons and pre-summoning evidence: typically 1–3 months
- Trial: usually 12–24 months in straightforward matters
Money matters
Cost components
- Court fee — nominal on the complaint
- Counsel fee — fixed brief fee or per-hearing, agreed in writing
- Notice cost: registered post, courier, drafting fee
Indicative only. Actual outflow depends on the forum, valuation and scope of work.
Avoid these
Common pitfalls
- Missing the 30-day notice window — fatal to the complaint
- Vague notice that does not specify the cheque or amount
- Filing in the wrong territorial jurisdiction
- Not preserving the original cheque and return memo
- Settling without recording it on court file — risks default and re-litigation
From the chambers
Practical tips
- Settlement is encouraged — Section 138 cases are compoundable at any stage with court permission
- Send the notice to all addresses in your records and to the registered email
- Even if the accused is a company, signatories may be liable under Section 141
Questions we hear
Frequently asked
Can I file if the cheque was given as security?
Yes, provided there is a legally enforceable debt or liability at the time the cheque was presented. Mere security against a future contingent liability is a defence the accused may raise.
What if the drawer changes address?
Send the notice to the address on the cheque, the address last known and the registered email. Refusal or non-claim at a correct address is deemed service.
This guide is general information, not legal advice. The applicable law and procedure may vary depending on the facts of your matter and amendments enacted from time to time.