Cheque Bounce Case - Section 138 NI Act, Procedure & Punishment
चेक बाउंस केस - धारा 138, प्रक्रिया और सज़ा
What is Cheque Bounce? (Section 138 NI Act)
A cheque bounce (also called dishonour of cheque) occurs when a bank refuses to process a cheque due to insufficient funds, signature mismatch, account closure, or other reasons. When a cheque is issued for a legally enforceable debt and is returned unpaid, it becomes a criminal offence under Section 138 of the Negotiable Instruments Act, 1881.
Punishment for Cheque Bounce
- Imprisonment up to 2 years
- Fine up to twice the cheque amount
- Or both
Section 138 NI Act is a compoundable offence - the parties can settle the matter at any stage with permission of the court.
Common Reasons for Cheque Bounce
- Insufficient funds in the drawer's account
- Signature mismatch - signature on cheque differs from bank records
- Account closed - the account from which the cheque was drawn has been closed
- Overwriting or alteration without counter-signature
- Cheque expired - presented after 3 months from the date on the cheque
- Payment stopped - drawer instructs the bank to stop payment
Cheque Bounce Case Procedure (Step-by-Step)
Filing a cheque bounce case under Section 138 NI Act involves a strict procedure with critical time limits. Missing any deadline can result in dismissal of your case.
7-Step Process
- Cheque is dishonoured by the bank - Bank returns the cheque with a "cheque return memo" stating the reason for dishonour (e.g., insufficient funds).
- Send legal notice within 30 days - The payee must send a written demand notice to the drawer within 30 days of receiving the cheque return memo. This is mandatory.
- Wait 15 days for payment - The drawer gets 15 days from the date of receipt of notice to make the payment.
- File criminal complaint within 30 days - If the drawer fails to pay within 15 days, the payee must file a complaint in the Magistrate's court within 30 days of the expiry of the 15-day notice period.
- Court issues summons - The Magistrate examines the complaint and if satisfied, issues summons to the accused.
- Trial proceedings - Evidence is recorded, arguments are heard. Summary trial procedure applies (Section 143 NI Act). Court may award interim compensation under Section 143A.
- Judgment - If convicted, punishment up to 2 years imprisonment and/or fine up to twice the cheque amount. If acquitted, any interim compensation must be refunded.
Critical Time Limits
| Step | Time Limit | Counted From |
|---|---|---|
| Present cheque to bank | Within 3 months | Date on the cheque |
| Send legal notice | Within 30 days | Date of receiving cheque return memo |
| Drawer to make payment | 15 days | Date of receipt of notice by drawer |
| File complaint in court | Within 30 days | Expiry of 15-day notice period |
Important
The Supreme Court in Sadanandan Bhadran v. Madhavan Sunil Kumar (1998) held that if the payee re-presents the cheque within its validity period and it bounces again, a fresh cause of action arises. The 30-day period for notice starts afresh from the second dishonour.
Legal Notice for Cheque Bounce (Mandatory)
Sending a legal notice is a mandatory pre-condition for filing a complaint under Section 138 NI Act. Without a valid notice, the court will dismiss the complaint.
Requirements for a Valid Legal Notice
- Must be sent within 30 days of receiving the cheque return memo from the bank
- Must be in writing - demanding payment of the cheque amount
- Must be sent by registered post (with acknowledgement due) or speed post or courier
- Must mention: cheque details (number, date, amount, bank), date of dishonour, and demand for payment within 15 days
- The notice is deemed served even if the drawer refuses to accept it or it is returned as "unclaimed" (C.C. Alavi Haji v. Palapetty Muhammad , 2007)
Generate Your Legal Notice
Use our free tool to create a properly formatted cheque bounce legal notice:
Generate Cheque Bounce Legal Notice5 Conditions for Section 138 NI Act
For a cheque bounce complaint to succeed under Section 138, all five conditions must be satisfied:
- Cheque was issued for discharge of a legally enforceable debt or liability - The cheque must have been given to pay an existing debt, not as a gift, security, or for an illegal purpose.
- Cheque was presented within 3 months - The cheque must be presented to the bank within 3 months from the date written on it (or within its validity period).
- Cheque was returned unpaid - The bank must have returned the cheque dishonoured due to insufficient funds or for any reason related to the drawer's account.
- Notice was sent within 30 days - The payee must have issued a written demand notice within 30 days of receiving information about the dishonour from the bank.
- Drawer failed to pay within 15 days - The drawer must have failed to make the payment within 15 days of receiving the notice.
Presumption in Favour of Holder
The Supreme Court in Rangappa v. Sri Mohan (2010) held that once the complainant proves that the cheque was issued by the accused and it was dishonoured, the court will presume that the cheque was issued for a legally enforceable debt (Section 139 NI Act). The burden shifts to the accused to prove otherwise. This is a rebuttable presumption, but the accused must lead credible evidence to discharge it.
Interim Compensation (Section 143A NI Act)
Section 143A, inserted by the Negotiable Instruments (Amendment) Act, 2018, allows courts to direct the accused to pay interim compensation up to 20% of the cheque amount during the trial.
Key Points
- The court may direct the drawer to pay interim compensation to the complainant at any stage of the trial
- Maximum interim compensation is 20% of the cheque amount
- The compensation must be paid within 60 days of the court's order
- If the accused is acquitted, the complainant must repay the interim compensation with interest at the bank rate within 60 days
- The interim compensation is adjustable against the final compensation or fine awarded upon conviction
Frequently Asked Questions
What is the punishment for cheque bounce in India?
Under Section 138 of the Negotiable Instruments Act, the punishment is imprisonment up to 2 years, or a fine up to twice the amount of the cheque, or both. Additionally, the court may award interim compensation up to 20% of the cheque amount during trial under Section 143A NI Act.
Is cheque bounce a criminal or civil case?
Cheque bounce can be pursued as both criminal and civil. Under Section 138 NI Act, it is a criminal offence tried by a Magistrate. Simultaneously, the payee can file a civil recovery suit for the cheque amount. Most people prefer the criminal route under Section 138 as it creates stronger pressure for recovery, and the court can order compensation up to twice the cheque amount.
What happens if I miss the 30-day deadline to send legal notice?
If you fail to send the legal notice within 30 days of receiving the cheque return memo, you lose the right to file a criminal complaint under Section 138 NI Act for that particular dishonour. However, you can: (1) re-present the cheque within its 3-month validity period - if it bounces again, a fresh cause of action arises, (2) file a civil suit for recovery of the amount.
Can a cheque bounce case be settled out of court?
Yes. Cheque bounce under Section 138 is a compoundable offence, meaning the parties can settle at any stage of proceedings with the court's permission. The accused typically pays the cheque amount plus compensation. Once settled, the complainant informs the court and the case is closed. Settlement is possible even during appeal.
What happens if the accused absconds in a cheque bounce case?
If the accused does not appear after summons, the court can issue a bailable warrant. If the accused still fails to appear, the court may issue a non-bailable warrant. In persistent non-appearance, the court can order proclamation and attachment of property under Section 82/83 CrPC (Section 84/85 BNSS). The trial can also proceed ex-parte (in the absence of the accused) in certain circumstances.
Reviewed by Vakeel360 Legal Team · Last updated: April 2026 · Verified against Negotiable Instruments Act 1881 (as amended 2018), Supreme Court judgments including Rangappa v. Sri Mohan (2010) , and CrPC/BNSS provisions.
Disclaimer: This guide is for informational purposes only and does not constitute legal advice. Always consult a qualified advocate for advice specific to your situation. See our Disclaimer.