A bounced cheque could land you in jail for up to two years, cost you double the cheque amount in fines, or both. Many people face cheque bounce cases but few grasp what happens next.
Section 138 of the Negotiable Instruments Act of 1881 states that insufficient funds make the drawer criminally liable. The payee must send a legal notice within 30 days after receiving the bank’s cheque return memo. The drawer then has 15 days to pay up. The payee can take legal action if payment doesn’t come through.
The process might look daunting, but knowing the 138 case procedure protects your financial interests. A typical trial court case takes about a year. The Supreme Court has recently introduced reforms to speed up these cases.
Let us walk you through what happens from the moment a cheque bounces until the court makes its final decision. This piece will help you direct your way through the legal process, whether you’re trying to recover money or defending against charges.
What is a Cheque Bounce and Why It Matters?
A cheque bounce happens when a bank refuses to pay against a presented cheque. This simple financial mistake can lead to serious legal trouble in India. You need to understand the complete cheque bounce case procedure, what makes it an offense, and why it matters.
Definition Under Section 138 of NI Act
The Negotiable Instruments Act of 1881 deals with cheque bounce cases under Section 138. This section states that a cheque bounce occurs when a bank returns a cheque unpaid. Two main reasons for dishonor exist under this section:
- The drawer’s account doesn’t have enough funds to honor the cheque
- The amount is more than what was agreed to be paid from that account through a bank agreement
Section 138 also lists three conditions that must be met to prove an offense:
- Someone must present the cheque within six months from its issue date or before it expires
- The payee must send a written demand notice to the drawer within 30 days after learning about the dishonor
- The drawer fails to pay within 15 days after getting this notice
The law applies only to cheques issued for legal debts or liabilities. So cheques given as gifts, donations, or for illegal purposes don’t fall under this law.
Common Reasons for Cheque Dishonour
Not having enough funds is the most common and legally punishable reason for cheque dishonor. Here are other reasons that can cause a cheque to bounce:
- Account-related issues: Closed account, frozen funds, or account doesn’t exist
- Signature problems: The signature on the cheque doesn’t match the bank’s records
- Technical errors: Overwriting, damaged cheque, or different amounts in words and figures
- Time-related factors: Expired cheque (over three months old), post-dated cheque presented too early
- Stopped payment: The drawer tells the bank not to honor the cheque
The Supreme Court has made it clear that a cheque bounce due to a “closed account” falls under Section 138 because it ended up with insufficient money in the account. Court rulings also cover signature mismatches under this section.
Legal Implications of a Bounced Cheque
A bounced cheque creates more than just hassles. Indian law treats it as both a criminal and civil offense. This helps the wronged party get justice while warning others not to make the same mistake.
The criminal penalties are tough. A conviction under Section 138 can put the drawer in jail for up to two years. They might also have to pay a fine of up to twice the cheque amount, or both. This makes the cheque bounce case procedure a serious matter for anyone who writes a cheque.
Banks charge penalties for dishonored cheques, and each bank has its own penalty structure based on the cheque amount. Multiple offenses usually face stricter penalties, and courts are harder on repeat offenders.
A cheque bounce hurts credit ratings and makes it harder to borrow money later. It also damages business relationships by breaking trust and reducing financial credibility.
The payee can take two paths: file criminal charges under Section 138 or start a civil lawsuit to get their money back. Many choose to do both at once to resolve the matter faster.
Initial Steps After a Cheque Bounces
A specific sequence of actions starts the moment you get notification about a dishonored cheque. Getting familiar with these original steps in the cheque bounce case procedure will protect your legal rights and financial interests.
Understanding the Cheque Return Memo
Banks issue an official document called a “cheque return memo” to both the drawer (person who wrote the cheque) and the payee (person who received it) when they refuse to honor a cheque. This memo becomes the first documentary evidence of dishonor and creates the foundation for any future legal action.
The cheque return memo has several significant pieces of information:
- The specific reason for dishonor (such as “insufficient funds”)
- The date of dishonor
- The cheque number and date of issue
- Details of the bank branch
Banks use specific reason codes in the memo, each with different legal implications. To cite an instance, “insufficient funds,” “account closed,” and “payment stopped by drawer” all qualify for action under Section 138 of the Negotiable Instruments Act.
You should preserve the original memo safely as it marks “Day Zero” of the statutory timeline for legal proceedings. The Reserve Bank of India requires banks to return dishonored cheques presented through clearing houses based on the prescribed return discipline. Cheques dishonored for insufficient funds must specifically indicate “insufficient funds” as the reason.
Communicating with the Drawer
Your next step should be contacting the drawer promptly after receiving the cheque return memo. This communication helps in several ways:
- It establishes that you’re aware of the dishonor
- It gives a chance for immediate resolution
- It creates a record of your attempt to resolve the matter amicably
Direct yet professional communication works best with the drawer. Let them know their cheque was dishonored, specify the bank’s reason, and ask about their payment intentions.
You can start with informal communication, but documentation remains vital throughout this process. Make sure to keep records of all conversations, messages, and attempts to contact the drawer about the dishonored cheque.
You can Call Advocate Kaushal +91 8287772088 who specializes in cheque bounce matters if you just need immediate help handling this communication professionally.
When to Consider Legal Action
Legal steps might become necessary if informal communication fails. The law sets strict timelines you must follow:
- A formal legal notice must reach the drawer within 30 days of receiving the cheque return memo.
- The notice should ask for payment within 15 days from when the drawer receives it.
- You can file a criminal complaint under Section 138 of the Negotiable Instruments Act if payment doesn’t arrive within those 15 days.
- This complaint needs filing within 30 days after the 15-day notice period expires.
The drawer’s response (or lack of it) to your communication attempts and formal notice determines whether you should take legal action. Proper documentation becomes vital during this phase, including:
- The original dishonored cheque
- The original cheque return memo
- Any agreements related to the transaction
- Records of communication with the drawer
Note that courts strictly enforce these timelines and delays can invalidate your case. Your complaint might face dismissal as time-barred unless exceptional circumstances justify the delay.
Issuing a Cheque Bounce Notice
A formal legal notice in a cheque bounce case changes everything. It moves the dispute from an informal discussion to a legal battle and sets up the groundwork that will lead to court proceedings.
Legal Requirements for the Notice
We needed to put the cheque bounce notice in writing. The Negotiable Instruments Act states this requirement under Section 138(b). The Supreme Court’s ruling in Shakti Travel & Tours v. State of Bihar highlights that a properly served legal notice is vital to maintain a cheque bounce case.
The law doesn’t specify a particular format, but your notice must state the facts accurately. It tells the drawer that you plan to take legal action if they don’t pay quickly. Once you send it out, you can’t change the notice or contradict what you stated in it later.
Most people think lawyers must draft these notices, but that’s not true. No law says you must have a legal professional issue the notice before filing a suit. Notwithstanding that, legal help will give a better chance of meeting all statutory requirements.
Time Limits for Sending the Notice
The law sets strict deadlines for sending a cheque bounce notice. Section 138(b) of the NI Act gives you 30 days to send this written notice after the bank tells you about the dishonored cheque. This countdown starts from the date on the bank’s cheque return memo.
You could lose your right to legal action if you miss this 30-day window. Courts rarely bend these rules except in special cases. The moment you get that cheque return memo, you just need to act fast.
The drawer has 15 days to pay up once they get your notice. Section 138(c) of the NI Act makes this clear. If they haven’t paid by the 16th day after getting the notice, you can take them to court.
What to Include in the Notice?
Your notice must have these key elements to work:
- Identification details: Full names and addresses of both parties – you (sender) and the drawer (recipient)
- Cheque information: Every detail about the cheque – its number, date, amount, and bank name
- Dishonor facts: When you presented the cheque, when it bounced, and why it bounced according to the return memo
- Demand for payment: A straightforward request for immediate payment
- Legal reference: Clear mention of Section 138 of the Negotiable Instruments Act
- Time limit warning: State the 15-day payment deadline
- Consequences warning: What happens if they don’t pay within the given time
Registered post with acknowledgment due (RPAD) is the quickest way to send your notice and prove delivery. You can also use email through an advocate or WhatsApp, but registered post remains the most trusted legal method.
Note that you should keep the original bounced cheque and return memo somewhere safe. You’ll need these as evidence if you go to court. These documents and proof that you sent the notice are the foundations of your legal case.
Waiting Period and Drawer’s Response
The next phase of a cheque bounce case starts after you send the legal notice. This vital waiting period determines if you need to take court action. The drawer gets one last chance to pay up before facing criminal charges.
15-Day Window for Payment
The drawer has 15 days to pay once they receive the legal notice. Section 138(c) of the Negotiable Instruments Act makes this timeframe mandatory. The law gives the drawer one final chance to honor the cheque amount.
The payee can’t start court proceedings during this period. The law provides this time so drawers can fulfill their financial obligations without criminal charges. The Supreme Court calls this 15-day window a “period of grace” and that’s with good reason too.
The law states that any payment made in these 15 days cancels the potential offense, whatever the drawer’s original intentions were. This shows the law’s main goal – making sure financial transactions are honored rather than just punishing offenders.
Possible Responses from the Drawer
The drawer might respond in several ways during this waiting period:
- Full payment: They might pay the entire cheque amount plus any bank charges from the dishonor.
- Partial payment: Some try to settle with partial payment and ask for more time for the rest.
- Settlement negotiation: They might suggest different arrangements, like installments or a discounted one-time payment.
- Dispute the debt: Some challenge the underlying transaction by claiming fraud, breach of contract, or other defenses.
- Request extension: They might accept the debt but need more time beyond the 15 days.
- Complete silence: Many just ignore the notice without responding or paying.
You should keep detailed records of all communications during this time. Each interaction could become evidence if you need to go to court.
When Silence or Refusal Triggers Next Steps
The law lets you file a criminal complaint under Section 138 if the drawer doesn’t pay within 15 days – whether they refuse outright or stay silent. Your right to take action starts on day 16 after they receive the notice.
You must act quickly because you have just 30 days to file the complaint. This countdown begins right after the 15-day payment window ends. Courts usually dismiss cases filed after this deadline, except in rare circumstances.
Courts calculate this 30-day period from when the drawer actually received the notice, not when you sent it. Proof of delivery becomes crucial to establish these timelines.
If you reach this stage, focus on preparing your court filing. Gather all your documents:
- The original dishonored cheque
- Bank return memo
- Copy of the legal notice with postal/courier receipt
- Proof of delivery of the notice
- Any written communications from the drawer
These documents are the foundations of your complaint. Arrange them by date to show you followed all procedural timelines in the cheque bounce case.
Filing a Cheque Bounce Case in Court
The final stage of the cheque bounce case starts after the 15-day notice period ends without payment. Your private dispute becomes an official legal matter under Section 138 of the Negotiable Instruments Act when you file a formal complaint in court.
Where to File the Complaint
The 2015 amendment to the Negotiable Instruments Act reshaped the scene for cheque bounce cases. You must file your complaint in the court where your bank branch is located. This amendment changed the earlier Supreme Court ruling in Dashrath Rupsingh Rathod v. State of Maharashtra that limited jurisdiction to where the cheque bounced.
Section 142(2) states that the proper court lies within the local jurisdiction of your bank branch where you maintain the account if a cheque is delivered for collection. This change lets complainants take legal action from their location instead of going to the drawer’s bank.
To cite an instance, the Mangalore court would have jurisdiction if you deposited the cheque in your Mangalore bank account, even if the cheque was presented at a Mumbai branch.
Do you want to know the right jurisdiction for your case? Call Advocate Kaushal +91 8287772088 to get expert guidance on where to file your complaint.
Documents Required for Filing
You must gather these essential documents to file a cheque bounce complaint:
- Original dishonored cheque – The physical cheque your bank returned
- Cheque return memo – Your bank’s statement showing why the cheque bounced (e.g., “insufficient funds”)
- Copy of the legal notice – The notice you sent to the drawer
- Proof of notice dispatch – RPAD slip, courier receipt, or other delivery proof
- Proof of non-payment – Evidence that shows no payment within 15 days
- Supporting documents for debt – Loan agreements, invoices, contracts that prove the cheque’s validity
- Complainant’s affidavit – Your written statement that verifies case facts
Your identity proof and correspondence that shows the underlying liability are great additions. Section 145 of the NI Act lets you provide evidence through an affidavit, which reduces your court appearances during the trial.
Filing Timeline and Jurisdiction Rules
You must file your complaint within one month (30 days) after the 15-day notice period ends without payment. The court might dismiss your case if you miss this deadline unless you can explain the delay.
These timelines are vital in the 138 case procedure:
- The cheque must go to the bank within three months from its issue date
- Legal notice must go out within 30 days of dishonor
- Your complaint must reach court within one month from when the 15-day notice period ends
A Judicial Magistrate of First Class or Metropolitan Magistrate must hear your complaint. No lower court can try Section 138 offenses.
The Supreme Court has made it clear that your account’s location matters more than where you deposited the cheque. This helps people dealing with drawers from different cities.
Court Procedure for Cheque Bounce Case
The courts handle cheque bounce cases through a special process after your complaint reaches them. This process aims to resolve cases quickly while giving both parties a fair chance to present their side.
Preliminary Hearing and Summons
When you file your complaint, the Magistrate looks at all documents to check if there’s a prima facie case. The court takes cognizance of the offense and sends a summons to the accused (drawer) if satisfied. This summons asks the drawer to come to court on a specific date.
The Supreme Court has made it clear that courts don’t need to hear the accused during the pre-cognizance stage of complaints filed under Section 138. This has made the original process smoother, as some courts used to issue pre-cognizance summons.
The court may issue these if the drawer doesn’t respond to summons:
- A bailable warrant
- A non-bailable warrant in some cases
The Supreme Court wants to speed up summons delivery. Courts must now send summons not just through regular channels but also through dasti (hand delivery by complainant) and digital means like email, WhatsApp, or other messaging apps.
Need help dealing with court summons and appearances? Call Advocate Kaushal +91 8287772088 who can guide you through your court proceedings.
Recording of Plea and Evidence
The judicial process moves to recording the drawer’s plea once they show up in court. The drawer faces two choices at this vital point:
- Admit guilt – leading to immediate sentencing with a fine, imprisonment up to two years, or both
- Plead not guilty – starting a full trial
Trial Courts can now ask specific questions at this post-cognizance stage. The Supreme Court has allowed them to check:
- If the accused owns the cheque account
- If they confirm their signature on the cheque
- If they admit owing money to the complainant when issuing the cheque
The Negotiable Instruments Act uses summary trials for cheque bounce cases. The Magistrate must give specific reasons for conducting a regular trial if they think imprisonment might exceed one year or find summary trial unsuitable. Courts can’t routinely change summary trials to regular ones without good reason.
The complainant then presents evidence, usually through an affidavit as Section 145 of the NI Act allows. This cuts down court visits and speeds things up. The Supreme Court ruled in Mandvi Cooperative Bank Limited v. Nimesh B. Thakore that while complainants can use affidavits, accused persons cannot.
Cross-examination and Arguments
Cross-examination comes next. The accused gets to question the complainant’s statements and documents, including the bounced cheque, return memo, legal notice, and postal evidence. This right forms a key part of their defense.
Defense teams usually focus their cross-examination on proving:
- The cheque was issued for a valid debt
- The signature is genuine
- The cheque presentation followed proper steps
Both sides present their arguments after cross-examination ends. Lawyers outline their positions based on the evidence shown. They typically reference relevant cases and laws that back their arguments.
The Supreme Court wants the examination-in-chief, cross-examination, and re-examination done within three months of case assignment. Courts now offer online payment options through QR codes or UPI links, so accused persons can pay during trial.
Possible Outcomes and Penalties
A cheque bounce case verdict can affect both parties in several ways, from criminal punishment to money recovery. Both drawers and payees should know these potential outcomes to prepare better for the final stages of their case.
Criminal Penalties Under Section 138
Section 138 of the Negotiable Instruments Act, 1881 allows courts to impose strict penalties on people guilty of issuing dishonored cheques. These penalties include:
- Imprisonment for up to two years
- A fine that can reach twice the cheque amount
- Both imprisonment and fine combined
This offense is criminal but remains bailable, compoundable, and non-cognizable. Courts usually prefer to impose compensation or fines instead of imprisonment, especially when drawers agree to pay the due amount with interest. Repeat offenders face tougher penalties because courts take a harder stance against regular defaulters.
Civil Recovery Options
The payee can file a civil suit to recover the cheque amount while pursuing criminal proceedings. A civil suit needs just a legal notice for recovery, unlike criminal cases that require a cheque bounce notice. This two-pronged approach has clear benefits:
- Civil suits focus on money recovery without criminal penalties
- They work as a backup when criminal proceedings take too long
- Payees get multiple ways to seek justice
The Bombay High Court has confirmed that filing both criminal and civil suits at the same time is legal. Most civil suits fall under Order 37 of the Civil Procedure Code, which helps speed up the recovery process through summary proceedings.
Relief for Drawer Upon Payment
Drawers can find relief through prompt action. The law states that no offense occurs under Section 138 if drawers pay the full amount within 15 days of getting the cheque bounce notice. Even after court proceedings start, drawers can:
- Suggest a settlement the payee might accept
- Pay during trial using court’s secure payment systems
- Show proof that they honored the cheque after legal notice
Section 147 of the NI Act lets courts allow settlement through compounding, even after conviction.
Compounding and Settlement Options
Settlement provides a practical alternative to long court battles in cheque bounce cases. The law actively supports dispute resolution through mutually acceptable terms and offers multiple ways to resolve issues throughout the cheque bounce case procedure.
When and How to Settle the Case
You can settle a cheque bounce case during any stage of the process – before filing the complaint, during trial, or after conviction. Section 147 of the Negotiable Instruments Act makes it completely legal to withdraw prosecution once both parties meet settlement terms.
Both parties benefit from early settlement by saving time, money and reducing stress. You can start the settlement process by reaching out to the opposing party directly or through your lawyer. After agreeing on terms, both parties need to submit a joint application to the court asking permission to compound the offense.
Role of Lok Adalat and Mediation
Lok Adalat proves to be the quickest way to resolve cheque bounce disputes through mutual agreement. The awards passed become binding civil court decrees that are final and cannot be appealed. This means settlements through Lok Adalat immediately end disputes.
Arbitration offers another path to resolve issues amicably. The Delhi High Court has clearly recognised arbitration’s importance in cheque bounce cases. This method helps preserve business relationships and provides a private space for negotiation – especially when you have commercial disputes where future business relationships matter.
Supreme Court Guidelines on Compounding
The Supreme Court modified its earlier guidelines on compounding in 2025, creating a simpler framework:
- No extra costs apply if payment happens before defense evidence recording
- A 5% penalty applies for payment after evidence but before judgment
- Payment to Sessions Court or High Court requires 7.5% of cheque amount
- Supreme Court payments need 10% of cheque amount
This updated structure reduces previous rates of 10%, 15% and 20%, reflecting lower interest rates while promoting early settlement.
Principal District Courts now let you settle payments quickly through secure QR codes or UPI links.
Conclusion
A cheque bounce case needs both legal know-how and timeline awareness. This piece walks you through the complete experience from a dishonored cheque to the final court verdict. It all begins when you get a return memo, followed by sending a legal notice, a mandatory 15-day wait, filing a court complaint, and finally reaching a judgment or settlement.
These procedural steps will protect your interests, whatever your role – whether you’re seeking payment or facing charges. You just need to act quickly within the set timelines: 30 days to send notice, 15 days for payment, and 30 days to file a complaint.
The legal consequences of a dishonored cheque are serious. You could face up to two years in prison, fines that are double the cheque amount, or both. On top of that, the law provides several ways to resolve issues through court proceedings, civil recovery, or settlement options through Lok Adalat and mediation.
Note that early settlement helps everyone save time, money, and stress. Over the last several years, the Supreme Court has provided clear guidelines for compounding at different stages to encourage resolution without a full trial.
The cheque bounce case procedure might look complex initially. Knowledge enables you to take the right steps within legal timeframes. Quick action, proper documentation, and understanding your rights will help you handle these situations better. This understanding will give you confidence to direct the legal system while protecting your financial interests, whether you’re pursuing payment or defending charges.
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FAQs
Q1. What are the key elements of a legal notice for a cheque bounce case?
A legal notice for a cheque bounce case must be in writing, sent by the payee within 30 days of receiving information about the dishonor, and must demand payment of the dishonored cheque amount.
Q2. What is the typical procedure after a cheque bounces?
After a cheque bounces, the payee should send a legal notice to the drawer within 30 days. If payment isn’t made within 15 days of receiving the notice, the payee can file a criminal complaint in court within 30 days of the notice period expiring.
Q3. Are there any recent changes to cheque bounce case procedures?
Recent changes include the provision for online payment facilities in courts through QR codes or UPI links, and updated Supreme Court guidelines on compounding offenses with reduced penalty rates to encourage early settlement.
Q4. Which court has jurisdiction over cheque bounce cases?
Cheque bounce cases should be filed in the court where the branch of the payee’s bank is located, as per the 2015 amendment to the Negotiable Instruments Act.
Q5. What are the potential penalties for issuing a dishonored cheque?
Penalties for issuing a dishonored cheque can include imprisonment for up to two years, a fine of up to twice the cheque amount, or both. However, courts often prefer imposing fines or compensation over imprisonment, especially if the drawer agrees to pay the outstanding amount with interest.