Section 138 NI Act: How to File a Cheque Bounce Case in India — Complete Legal Guide
- shubhamtulsian05
- Jun 14
- 4 min read
Cheque dishonour is one of the most common commercial disputes in India. The Negotiable Instruments (NI) Act, 1881 — specifically Section 138 — makes cheque bounce a criminal offence, punishable with imprisonment up to 2 years and/or a fine up to twice the cheque amount. This strong legal remedy has made Section 138 one of the most-filed cases in Indian courts.
If you have received a bounced cheque — whether for a loan repayment, business payment, property transaction, or any other purpose — here is exactly what you need to do and when.
What is Section 138 NI Act?
Section 138 of the Negotiable Instruments Act, 1881 makes it a criminal offence when a cheque issued for the discharge of a legally enforceable debt or liability is returned unpaid by the bank due to insufficient funds or exceeding the amount arranged to be paid.
Key requirement — 'legally enforceable debt': The cheque must have been issued towards an existing legal debt. A cheque given as a gift, security deposit (in some cases), or for an illegal transaction is outside the scope of Section 138.
Reason for dishonour must be funds-related: The dishonour must be due to insufficient funds, account closed, or exceeding the amount arranged. Dishonour due to signature mismatch, post-dating issues, or stop payment instructions given by the drawer are treated differently — though courts have expanded the scope over time.
Step-by-Step Process to File a Cheque Bounce Case
Step 1 — Receive the Dishonour Memo
When your bank presents the cheque and it bounces, your bank will give you a 'cheque return memo' or 'dishonour memo' stating the reason for dishonour. Keep this original document safely — it is the foundation of your case.
Step 2 — Send a Legal Notice Within 30 Days
This is the most critical step. You must send a legal notice to the drawer (the person who issued the cheque) within 30 days of receiving the dishonour memo. The notice must:
Demand payment: Demand the cheque amount within 15 days of receipt of the notice.
Mode of sending: Send via Registered Post AD (Acknowledgement Due) and ideally also by courier and email. Keep all proof of sending and delivery.
Content: The notice must state the cheque number, date, amount, bank, date of dishonour, reason for dishonour, and demand for payment within 15 days.
If you miss the 30-day window from the dishonour date, you lose your right to file a Section 138 complaint. This deadline is absolute — courts cannot condone delay.
Step 3 — Wait for 15 Days
The drawer has 15 days from receipt of your notice to make the payment. If they pay within this period, the matter is settled. If they fail to pay or ignore the notice, you have the right to file a criminal complaint.
Step 4 — File Criminal Complaint Within 30 Days of Expiry of Notice Period
If the drawer does not pay within 15 days of receiving the notice, you must file a criminal complaint under Section 138 in the Magistrate's Court within 30 days of the expiry of that 15-day notice period. The complaint must be filed in the court having jurisdiction over the place where the cheque was presented for payment (i.e., your bank's location).
Documents required: Original bounced cheque, original dishonour memo from bank, copy of legal notice, proof of sending the notice (postal receipt, tracking report, AD card), proof of delivery, and any agreement or document evidencing the debt.
Step 5 — Court Process
Cognizance and summons: The Magistrate examines the complaint and, if satisfied, takes cognizance and issues summons to the accused (drawer).
Trial: The case is tried as a summary trial (for amounts up to ₹2 lakh) or a summons trial. The complainant leads evidence, followed by the accused's defence.
Conviction and sentence: On conviction, the court may impose imprisonment up to 2 years, fine up to twice the cheque amount, or both. Courts typically also direct payment of the cheque amount as compensation under Section 357 CrPC.
Civil Remedy — Summary Suit Under Order 37 CPC
In addition to the criminal complaint, you can simultaneously file a civil summary suit under Order 37 of the Civil Procedure Code to recover the cheque amount with interest. Summary suits are faster than regular civil suits — the defendant must seek leave to defend within a short period, failing which a decree can be passed straightaway.
Filing both the criminal complaint AND the civil suit simultaneously gives maximum pressure for quick settlement and ensures you recover both the principal amount and interest even if the criminal conviction is delayed.
Recent Supreme Court Rulings on Section 138
Presumption in complainant's favour: Under Section 139 NI Act, there is a statutory presumption that the cheque was issued for a legally enforceable debt. The burden shifts to the accused to rebut this presumption.
Stop payment is no defence: The Supreme Court has held in multiple cases that a stop payment instruction by the drawer does not absolve them of criminal liability under Section 138 if the cheque was issued towards a debt.
Interim compensation: Under Section 143A (inserted in 2018), courts can now direct the drawer to pay interim compensation of up to 20% of the cheque amount during the trial — before the case is decided. This is a significant tool to get partial recovery quickly.
Compounding: Section 138 cases are compoundable — meaning the parties can settle at any stage of the case, including during appeal, and the court will acquit the accused on payment.
Limitation Period
The original cheque remains valid for 3 months from the date written on it. You can re-present the cheque once within the validity period — and if it bounces again, the 30-day notice period starts fresh from the second dishonour. The overall limitation period for filing a civil suit for recovery of the cheque amount is 3 years from the date of dishonour.
How PGT & Associates Can Help
PGT & Associates provides complete Section 138 legal assistance — drafting and sending the legal notice within the mandatory 30-day period, filing the criminal complaint before the appropriate Magistrate's Court, filing simultaneous civil summary suits for recovery, appearing at all hearing dates, and negotiating settlement/compounding. Our combined CA and legal expertise means we also handle the financial documentation and debt verification aspects that strengthen your case. Contact us at +91-87994-99189.
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