A cheque bounce is an offence under section 138 of the Negotiable Instruments Act, 1881 when a cheque issued for a legally enforceable debt is returned unpaid for insufficient funds or because it exceeds the arrangement with the bank, and the drawer does not pay within 15 days of a demand notice. The punishment is imprisonment of up to two years, or a fine of up to twice the cheque amount, or both. Three time limits decide most cases.
A complaint under section 138 is a criminal case, but its main purpose is to recover the cheque amount. The law presumes that the cheque was issued for a debt, and the drawer has to rebut that presumption.
The advocate acts for the payee who wants to recover the money and for the drawer who wants to defend the complaint. Consultation can be held by phone or by video.
When dishonour becomes an offence
The conditions of section 138 are:
- The cheque was drawn on an account kept by the drawer for payment of a debt or other liability
- It was presented to the bank within three months of its date, or within its validity, whichever is earlier
- It was returned unpaid because the money in the account was not enough or it exceeded the amount the bank had agreed to pay
- A demand notice was sent in time and the drawer failed to pay within 15 days of receipt
- The complaint was filed in time
The time limits
The statute sets three periods and a missed period often decides the case:
- Presentation: the cheque is presented within three months of its date or within its validity
- Notice: a written demand notice is sent to the drawer within 30 days of the payee receiving information from the bank that the cheque was returned
- Payment and complaint: the drawer has 15 days from receipt of the notice to pay, and the complaint is filed within one month after those 15 days end under section 142
The statutory notice
The notice states the cheque details, the dates, the return memo and the demand for payment of the cheque amount within 15 days. It is sent to the drawer's correct address by registered post or other proved mode, and the proof of service is kept. A drawer who receives a notice can reply, and the reply is drafted with the defences in view.
Complaint, jurisdiction and summary trial
The complaint is filed before the Metropolitan Magistrate. Under section 142(2) of the Act, the court that has jurisdiction is the court in whose area the branch of the payee's bank where the cheque was delivered for collection is located, if the cheque was delivered through an account. The trial is summary under section 143, with evidence on affidavit. Section 143A allows the court to order interim compensation of up to 20 per cent of the cheque amount in a suitable case.
Companies and directors
When the drawer is a company, section 141 makes every person in charge of and responsible for the conduct of the business at the time of the offence liable, subject to the defences in that section.
Defences commonly raised
Defences depend on the facts and the evidence:
- No legally enforceable debt, or a debt that is time-barred
- Cheque given as security and not for a debt, which is a question of fact
- Notice not received, or sent after the time allowed
- Complaint filed out of time or in a court without jurisdiction
- Payment made after the cheque was issued, with proof
- Signature or cheque details disputed
- The presumption under section 139 and how it is rebutted
Compounding, settlement and appeal
The offence can be compounded under section 147, with the permission of the court at the stage the law and the court's guidelines allow. A settlement is recorded in the court. A person who is convicted can appeal to the Sessions Court, and under section 148 the appellate court can ask the appellant to deposit at least 20 per cent of the fine or compensation. Revision to the High Court is also available.
How a matter is run
- The documentsThe cheque, the return memo, the invoice or agreement and any messages and receipts are collected.
- The datesThe dates of the cheque, presentation, return, notice and the 15 days are checked against the time limits.
- The positionThe strength of the claim or the defence and the right court are assessed.
- Filing and appearanceThe notice, reply or complaint is drafted and filed, and the advocate appears through the trial or the settlement.
Laws and forums
Laws that usually apply
- Negotiable Instruments Act, 1881, sections 138, 139, 141, 142, 143, 143A, 147 and 148
- Bharatiya Nagarik Suraksha Sanhita, 2023
- Bharatiya Sakshya Adhiniyam, 2023
- Limitation Act, 1963 (for the time-barred debt question)
Courts and forums
- Metropolitan Magistrate courts in Mumbai
- Sessions Court, in appeal
- Bombay High Court, in revision and petitions
Related guides
Frequently asked questions
What is a cheque bounce case?
It is a criminal complaint under section 138 of the Negotiable Instruments Act, 1881 for a cheque that was returned unpaid, for lack of funds or because it exceeds the arrangement with the bank, where the drawer does not pay after a demand notice.
What is the time limit to send a legal notice after a cheque bounces?
The demand notice must be sent within 30 days of the payee receiving information from the bank that the cheque was returned unpaid.
How long does the drawer have to pay after the notice?
The drawer has 15 days from the date of receipt of the notice. If the amount is not paid in that time, the cause of action for the complaint arises.
Where is a cheque bounce complaint filed?
The complaint is filed before the court with jurisdiction under section 142(2) of the Act. Where the cheque was delivered for collection through an account, this is the court in whose area the branch of the payee's bank holding that account is located.
Can a cheque bounce case be settled?
Yes. The offence is compoundable under section 147. The parties can settle at any stage, and the court records the settlement and disposes of the complaint. Compounding at a later stage can carry costs under the Supreme Court's guidelines.
What defences are available to the drawer?
Common defences are that there was no legally enforceable debt, that the notice was not received or was sent late, that the complaint was filed late or in the wrong court, and that the cheque was given for another purpose. The drawer has to rebut the presumption in section 139.
Can the court order payment during the trial?
Yes. Section 143A allows the court to direct the drawer to pay interim compensation of up to 20 per cent of the cheque amount in a summary trial or when the drawer pleads not guilty, in the manner the section provides.
Related practice areas
General information only. This page is for information. It is not legal advice, an advertisement or a solicitation, and it makes no claim about results. The law changes, and the position in a case depends on its facts. A professional relationship begins only when the advocate agrees to act in a matter.