You gave someone goods, services, or a loan. They gave you a cheque. You went to deposit it — and it came back as “insufficient funds” or “payment stopped.”
A bounced cheque is frustrating. But in India, you have strong legal rights. Section 138 of the Negotiable Instruments Act, 1881 makes cheque dishonour a criminal offence — and the penalty includes jail time for the person who issued the bounced cheque.
This guide tells you exactly what to do, step by step.
What is a Cheque Bounce?
A cheque “bounces” — technically called “dishonour” — when the bank returns it unpaid. The most common reasons include:
- Insufficient funds in the account
- Signature mismatch
- Stale cheque (presented after 3 months from the date on the cheque)
- Post-dated cheque presented too early
- Account closed
- Stop payment instructions given by the drawer
For a Section 138 case, the cheque must have been issued for a debt or legally enforceable liability. A cheque given as a gift or for an illegal purpose cannot support a Section 138 complaint.
What Does Section 138 Say?
Section 138 of the Negotiable Instruments Act makes it a criminal offence to issue a cheque that bounces due to insufficient funds or because the amount exceeds the sanctioned credit limit — if the cheque was issued in discharge of a debt or other liability.
Punishment: Imprisonment up to 2 years, or fine up to twice the cheque amount, or both.
This is serious. It means the person who gave you a bad cheque can go to jail.
Step-by-Step: How to File a Cheque Bounce Case
Step 1: Present the Cheque and Get the Memo
First, present the cheque to your bank. When it bounces, your bank will give you a return memo stating why it was returned. Keep this document carefully — it is your first piece of evidence.
Step 2: Send a Legal Notice Within 30 Days
Within 30 days of receiving the bank’s return memo, you must send a legal notice to the cheque issuer. This notice must:
- State that the cheque has been returned unpaid
- Demand payment of the cheque amount within 15 days of receiving the notice
- Be sent by registered post to the correct address
This step is mandatory. Without a proper legal notice, your Section 138 case will not succeed.
Our individual legal services team drafts and sends hundreds of Section 138 notices every year. Getting the notice drafted correctly is crucial.
Step 3: Wait 15 Days
Give the other party 15 days from the date of receiving your notice to make payment. If they pay, the matter is resolved. If they don’t — or if they ignore the notice — you move to the next step.
Step 4: File a Complaint in Court Within 30 Days
If payment is not made within 15 days of notice receipt, you must file a criminal complaint under Section 138 in the appropriate Magistrate’s court within 30 days of the 15-day period expiring.
Where to file? The complaint can be filed in the court of the area where:
- The cheque was presented to the bank
- The cheque was issued (drawer’s bank branch)
- The drawee bank branch is located
- The payee resides or conducts business
The Supreme Court has clarified these jurisdiction rules multiple times. Getting the jurisdiction right is important, or your case can be dismissed.
Step 5: Court Process
After filing, the court:
- Issues a summons to the accused (cheque issuer)
- The accused must appear and respond
- Evidence is recorded
- Both sides argue the matter
- The court delivers its judgment
Interim compensation: Under Section 143A of the NI Act, the court can order the accused to pay up to 20% of the cheque amount as interim compensation while the trial is pending. This is a powerful relief for cheque bounce victims.
Appellate compensation: If convicted, the court can order the accused to pay the entire cheque amount plus interest as compensation.
Common Defences the Accused May Take
Be prepared for the cheque issuer to raise these defences:
- The cheque was given as security, not for a debt
- The cheque was a blank signed cheque that was misused
- The signature on the cheque is forged
- No debt existed between the parties
Having good documentation — contracts, invoices, messages, and bank statements — strengthens your case significantly.
Compounding and Settlement
Section 138 cases can be settled through compromise. If the parties agree on a payment amount, they can apply to the court to compound (settle) the matter. The court may accept the compounding and close the case.
In practice, many Section 138 cases end in settlement before trial — because the threat of criminal conviction is a strong motivator for the accused to pay.
Our dispute resolution team often negotiates settlements in cheque bounce matters that recover the full amount for our clients, often faster than a full trial.
What If You Receive a Section 138 Notice?
If you are the one who issued a cheque that bounced and have received a Section 138 legal notice:
- Do NOT ignore it
- Make payment within the 15-day period if you genuinely owe the money
- If you dispute the debt, consult a lawyer immediately
- Do not miss any court dates once a case is filed
Ignoring a Section 138 notice is one of the most common mistakes. Many people think it will “go away.” It won’t. The consequences of conviction are serious — criminal record and possible imprisonment.
If you’ve received a notice, our banking and finance legal team can assess your defences and represent you effectively.
Time Limits to Remember
| Action | Time Limit |
|---|---|
| Send legal notice after cheque return | Within 30 days of bank’s return memo |
| Accused must pay after notice | Within 15 days of receiving the notice |
| File complaint in court | Within 30 days of expiry of 15-day notice period |
Missing any of these deadlines can kill your case. This is why acting quickly is essential.
Multiple Cheques — Multiple Cases?
If someone gave you multiple cheques and all bounced, each bounced cheque is a separate offence. You must file a separate complaint for each cheque. However, courts can try multiple cases together (joint trial) for efficiency.
Final Thoughts
A cheque bounce case in India under Section 138 is one of the most accessible legal remedies available to ordinary people and businesses. The law gives you real teeth — criminal consequences for the person who dishonoured your cheque.
But timing matters. The 30-day notice deadline and the 30-day filing deadline are strict. Miss them, and you lose your rights.
At Sharma & Sharma Law Chambers LLP, our experienced advocates handle Section 138 cases across all courts in Lucknow, Allahabad, and across Uttar Pradesh. Contact us for immediate assistance.