A bounced cheque is not just an inconvenience in India – it can be a criminal offence under Section 138 of the Negotiable Instruments Act, with real consequences for the person who issued it.
What Counts as a Section 138 Offence
When a cheque issued for a legally enforceable debt is dishonoured due to insufficient funds, and the drawer fails to pay within 15 days of receiving a written demand notice, the payee can initiate criminal proceedings.
Steps for the Payee (Cheque Recipient)
- Present the cheque again within its validity, or proceed directly to a demand notice after dishonour
- Send a written demand notice within 30 days of receiving the bank’s dishonour memo
- If unpaid after 15 days from the notice, file a complaint before the Magistrate within one month
Steps If You Are the One Who Issued the Cheque
Do not ignore a Section 138 notice – respond promptly, either by paying the amount if the debt is genuinely owed, or by preparing your defence if you have valid grounds to dispute liability. Ignoring the notice generally makes your position worse, not better.
Possible Outcomes
Section 138 proceedings can result in compensation up to twice the cheque amount, and in some cases imprisonment, though many matters are resolved through compounding (settlement) before reaching that stage.
Why Timelines Matter So Much Here
Nearly every step in a Section 138 case – the demand notice, the response window, the complaint filing – has a strict deadline. Missing any of them can be fatal to the case, on either side.