Legal Guide · Updated July 2026 · 6 min read

A bounced cheque is more than an inconvenience. Under Section 138 of the Negotiable Instruments Act, 1881, it is a criminal offence punishable with imprisonment of up to two years, a fine of up to twice the cheque amount, or both. This guide walks you through what to do if a cheque issued to you is dishonoured.

⚖️ Key deadline: You must send a written demand notice to the drawer within 30 days of receiving the bank's cheque return memo. Missing this window can defeat your case.

When does Section 138 apply?

The offence is made out when all of the following are true:

  • The cheque was issued to discharge a legally enforceable debt or liability (not as a gift or security in every case).
  • It was presented to the bank within its validity period (3 months from the date on the cheque).
  • It was returned unpaid, commonly for "insufficient funds" or "exceeds arrangement".
  • The drawer failed to pay within 15 days of receiving your demand notice.

Step-by-step process

  1. Collect the return memo. Your bank issues a cheque return memo stating the reason for dishonour. Keep the original.
  2. Send a legal notice within 30 days. A written demand for the cheque amount, sent by registered post or courier with proof of delivery. Most people engage an advocate at this stage.
  3. Wait 15 days. The drawer has 15 days from receipt of the notice to pay. If they pay, the matter ends.
  4. File the complaint within 1 month. If no payment comes, file a criminal complaint before the Magistrate within one month of the 15-day period expiring. Jurisdiction generally lies where your bank branch (payee's bank) is located.
  5. Trial. Section 138 cases are meant to be tried summarily. Courts may also order interim compensation of up to 20% of the cheque amount under Section 143A.

What if you are the accused?

If you issued the cheque, defences may include: the cheque was given as security and no debt existed, the notice was defective or never served, the signature was disputed, or the debt was time-barred. An advocate can also negotiate a compounding (settlement), which is permitted at any stage under Section 147.

Documents you will need

  • Original cheque and cheque return memo
  • Copy of the legal notice with postal receipts and delivery proof
  • Proof of the underlying debt: invoice, loan agreement, ledger
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Disclaimer: This article is for general information only and is not legal advice. Timelines and provisions may change; consult a qualified advocate for your specific matter.