When a cheque issued to repay a debt or liability is returned unpaid, the payee may have both a civil claim and a criminal remedy under section 138 of the Negotiable Instruments Act, 1881. The criminal remedy is subject to strict time limits.
We act for payees who need to issue a statutory notice and file a complaint, and for drawers who have received a notice or summons.
What this covers
- Drafting and serving the statutory demand notice
- Filing complaints before the competent Magistrate
- Defending persons and companies accused under section 138
- Interim compensation applications
- Settlement and compounding of cases
- Appeals against conviction or acquittal
How the process generally works
- Cheque returned unpaid
The bank returns the cheque with a memo, for example for insufficient funds.
- Demand notice within 30 days
The payee must send a written demand to the drawer within 30 days of receiving information of the dishonour.
- 15 days to pay
The drawer has 15 days from receipt of the notice to pay the cheque amount.
- Complaint within one month
If payment is not made, the complaint must be filed within one month after the 15-day period ends. Delay can be condoned only for sufficient cause.
- Trial
The court issues summons and the case proceeds, usually as a summary trial. The parties may settle at any stage.
Relevant law
- Negotiable Instruments Act, 1881: sections 138, 139 (presumption), 142 (cognizance and jurisdiction), 143A (interim compensation), 147 (compounding) and 148 (deposit in appeal)
- A cheque is generally valid for three months from its date under Reserve Bank of India directions
Common questions
What is the punishment under section 138?
Imprisonment for up to two years, a fine of up to twice the cheque amount, or both.
Where is the complaint filed?
Under section 142(2), generally before the court within whose jurisdiction the payee's bank branch, where the cheque was delivered for collection, is situated.
Can a cheque bounce case be settled?
Yes. The offence is compoundable, and many cases are resolved by payment and settlement recorded before the court.