Cheque bounced? Section 138 deadlines and what to do

A tenant's rent cheque, a friend's loan repayment, a customer's payment for goods: it comes back from the bank with a slip saying "Funds insufficient". People usually search for two things: "can I file a case?" and "how many days do I have?". This guide answers both, for the person holding the cheque and for the person who issued it.

When a bounced cheque becomes a crime

Under Sec 138, Negotiable Instruments Act, 1881, the person who issued (the drawer) commits an offence when all of these are true:

• the cheque was given to discharge a legally enforceable debt or liability (a loan, rent, price of goods, a settlement amount), not as a gift;
• it was presented within its validity, which is three months from the date on it;
• the bank returned it unpaid because the account did not have enough money or the amount exceeded the arrangement. Courts have also treated "account closed" and "payment stopped by drawer" as covered where funds were short;
• you (the payee) sent a written demand notice in time, and the drawer did not pay within 15 days of receiving it.

The punishment is imprisonment up to two years, or a fine up to twice the cheque amount, or both. In practice, courts focus on getting you paid.

The law presumes the cheque was given for a debt Sec 139 NI Act. The drawer must prove otherwise. In Sanjabij Tari v Kishore S. Borcar (2025), the Supreme Court held that a cash loan above ₹20,000 is still a "legally enforceable debt" for Section 138, even if taking it in cash broke the Income Tax Act rule.

The timeline you must not miss

1. Day 0: return memo. Your bank gives you the cheque back with a return memo stating the reason. Keep the original cheque and memo safely. You may present the cheque again within its three-month validity if the drawer asks.
2. Within 30 days: demand notice. Send a written notice to the drawer demanding the cheque amount, within 30 days of receiving the bank's information. Send it by registered post or speed post with acknowledgement, and also by email or WhatsApp if you have them.
3. 15 days to pay. The drawer has 15 days from receiving the notice to pay. If they pay, there is no offence. A notice returned as "refused" or "not claimed" at the correct address is usually treated as served.
4. Within one month: complaint. If the 15 days pass without payment, the offence is complete. File a complaint before the Judicial Magistrate within one month Sec 142(1) NI Act. A late complaint can be accepted only if you show sufficient cause for the delay.
5. Which court? Where you deposited the cheque for collection, the case is filed in the court for the area of your bank branch where you hold the account Sec 142(2) NI Act, not where the drawer lives.

What the notice should say

Keep it short and exact: the cheque number, date, amount and bank; the date of return and the reason on the memo; the debt for which the cheque was given; and a clear demand to pay the cheque amount within 15 days of receipt. Do not demand a different amount, such as the cheque amount plus large interest, without separating it clearly; a confusing demand can weaken the notice.

What happens in court

• Summary trial. These cases follow a shorter procedure. Your complaint is supported by an affidavit, and the court issues summons.
• Pay at the start. Following Sanjabij Tari (2025), summons are to tell the accused that they can pay the cheque amount at the first stage, including through an online link, and the case can then be closed.
• Interim compensation. The court may order the drawer to pay up to 20% of the cheque amount within 60 days (extendable by 30 days). If the drawer is later acquitted, you must refund it with interest Sec 143A NI Act.
• Deposit on appeal. If the convicted drawer appeals, the appeal court may order a deposit of at least 20% of the fine or compensation Sec 148 NI Act.
• Settlement any time. The offence is compoundable (the parties can settle and close it) Sec 147 NI Act. Under the 2025 guidelines, settling before defence evidence costs nothing extra; after that, the court adds costs of 5% of the cheque amount at trial, 7.5% in the Sessions Court or High Court, and 10% in the Supreme Court.

If you issued the cheque

Do not ignore the notice. If you owe the money, pay within 15 days and take a written receipt; the offence then never arises. If you do not owe it, reply in writing within the 15 days explaining why: the debt was already paid, the cheque was a blank security cheque misused, the amount was filled in wrongly, or there was no debt at all. Keep proof. You can rebut the Section 139 presumption at trial with evidence, but your early reply matters.

Once a case is filed, attend every date. Absence can lead to a warrant. Ask the court to refer the case to mediation or the Lok Adalat if you want to settle in instalments.