Written and reviewed by Adv. Tanmay S. Shirsat, Advocate, High Court of Bombay. Consultations in English, Hindi and Marathi, in person or by video call. Last updated October 2026.
Cheque Dishonour Under Section 138 of the Negotiable Instruments Act
When a cheque issued to discharge a legally enforceable debt is returned unpaid because of insufficient funds, or because it exceeds the amount arranged with the bank, the drawer may be prosecuted under Section 138 of the Negotiable Instruments Act, 1881. The offence is punishable with imprisonment of up to two years, a fine of up to twice the cheque amount, or both.
Strict Timelines in a Cheque Bounce Case
- Presentation: The cheque must be presented within its validity period, currently three months from its date.
- Legal notice: A written demand notice must be sent to the drawer within 30 days of receiving the bank's information that the cheque was returned.
- Time to pay: The drawer has 15 days from receiving the notice to make payment.
- Complaint: If payment is not made, the complaint must be filed within one month after the 15-day period ends.
- Jurisdiction: The complaint is filed in the court within whose jurisdiction the payee's bank branch, where the cheque was presented for collection, is situated.
Missing a deadline can defeat an otherwise strong case. The bank return memo, the notice and the postal records should be preserved carefully.
During the Case
The court may direct the accused to pay interim compensation of up to 20 percent of the cheque amount under Section 143A. If the accused is convicted and appeals, the appellate court may require a deposit of at least 20 percent of the fine or compensation under Section 148. Many cheque dishonour cases are also settled through compromise, including before Lok Adalats.
For persons accused in a cheque case, defences may include the absence of a legally enforceable debt, defects in the notice, limitation and the circumstances in which the cheque was issued.
Civil Recovery: Notices, Summary Suits and Execution
- Legal notice: A clear demand notice often leads to payment or settlement without litigation.
- Summary suit (Order XXXVII CPC): A faster civil remedy for claims based on written contracts, bills of exchange and similar documents, in which the defendant must obtain the court's leave to defend.
- Commercial disputes: Claims of a specified value may require pre-institution mediation under the Commercial Courts Act, 2015 before a suit is filed.
- Execution: Enforcing a decree or award through attachment and sale of property, garnishee orders or other modes under Order XXI CPC.
Documents to Keep Ready
- Original dishonoured cheque and bank return memo
- Copy of the legal notice with postal or courier proof
- Invoices, agreements, ledgers or loan documents showing the debt
- Correspondence and messages about payment
- Any earlier settlement or acknowledgment of the debt