When a cheque is dishonoured for insufficient funds, the law gives the payee a powerful criminal remedy under Section 138 of the Negotiable Instruments Act, 1881. The procedure is strict and time-bound — missing a deadline can sink an otherwise strong case. This guide sets out the process step by step. Our cheque bounce lawyers handle complaints and defences across Delhi.

When does Section 138 apply?

Section 138 is attracted when all of the following are met:

The cheque was issued to discharge a legally enforceable debt or liability.
It was presented to the bank within its validity period (cheques are valid for 3 months from the date written on them).
It was returned unpaid — typically for “insufficient funds” or because it exceeds the arrangement with the bank.

The mandatory step-by-step process

The timeline is the heart of a Section 138 case:

Step	What happens	Deadline
1. Dishonour	The bank returns the cheque with a return memo	—
2. Demand notice	The payee sends a written demand notice to the drawer asking for payment	Within 30 days of receiving the return memo
3. Payment window	The drawer gets time to pay the cheque amount	15 days from receiving the notice
4. Cause of action	If the drawer fails to pay within 15 days, an offence is made out	Day 16
5. Complaint	The payee files a criminal complaint before the Magistrate	Within 1 month of the end of the 15-day period

Getting the 30-day notice and the one-month complaint windows right is essential — a complaint filed too early or too late can be dismissed.

Where is the case filed?

Following the 2015 amendment to Section 142, the complaint is filed before the Magistrate having jurisdiction over the branch of the bank where the payee maintains the account in which the cheque was deposited.

Punishment

On conviction, the drawer can face imprisonment of up to two years, or a fine of up to twice the cheque amount, or both.

Interim compensation — the 2018 amendment

The Negotiable Instruments (Amendment) Act, 2018 strengthened the payee’s position considerably:

Section 143A — the court may order the drawer to pay interim compensation of up to 20% of the cheque amount during the trial.
Section 148 — if the drawer appeals against a conviction, the appellate court may direct a deposit of a minimum of 20% of the fine/compensation.

Common defences

A drawer may, for example, show that:

there was no legally enforceable debt (the cheque was a gift or for an unenforceable claim);
the cheque was given only as security and the debt had not crystallised (though courts have held that a security cheque can still attract Section 138 once the liability is due — I.C.D.S. Ltd. v. Beena Shabeer);
the mandatory notice was not validly served, or the complaint was filed outside the time limits.

Practical tips

Always present the cheque within three months and keep the bank’s return memo safely.
Send the demand notice promptly and by a traceable mode (registered post / courier with proof).
Diarise the 15-day and one-month deadlines.

Disclaimer: This is general information, not legal advice. Cheque bounce cases turn on their facts and exact dates. Please consult our lawyers about your matter.

Cheque Bounce Under Section 138: Complete Process & Timeline