Cheque Bounce & Section 138 — What Actually Happens, Step by Step

A common belief is that cheque bounce “has been decriminalised”. It hasn’t. Proposals to decriminalise minor economic offences have come and gone, including the Jan Vishwas (Amendment of Provisions) Bill, 2025, which the government withdrew in March 2026 for changes. Section 138 of the Negotiable Instruments Act, 1881 is still a criminal offence. This guide explains what happens when a cheque bounces, step by step, with a worked timeline and the defences courts actually accept.

Cheque bounce at a glance

• Still a criminal offence: under Section 138, punishable with imprisonment up to two years, a fine up to twice the cheque amount, or both.
• Bailable and compoundable: the case starts on a written complaint by the payee, and the parties can settle (compound) it at any stage.
• Strict timelines: 30 days to send a demand notice, 15 days for the drawer to pay, then one month to file the complaint.
• Interim compensation: since 2018, the trial court can order the accused to pay up to 20% of the cheque amount as interim compensation (Section 143A).

2 years
Maximum imprisonment

2× cheque value
Maximum fine

20%
Interim compensation the court can order

3 months
Validity of a cheque for presentation

The cheque bounce process, step by step

1. Present the cheque within its validity

A cheque is valid for three months from its date. Section 138 applies only if it was presented within that period, or within its stated validity if shorter.

2. The cheque returns unpaid

Your bank returns it with a memo giving the reason, commonly “funds insufficient”, “exceeds arrangement”, “account closed” or “payment stopped by drawer”.

3. Send a legal demand notice within 30 days

You must send a written notice to the drawer, demanding payment of the cheque amount within 30 days of receiving the bank’s return memo. This step is mandatory. Send it by registered post or speed post with acknowledgement, and also by email or WhatsApp if you have them. Keep the proof.

4. The drawer gets 15 days to pay

If the drawer pays the cheque amount within 15 days of receiving your notice, no offence is made out and the matter ends.

5. File a complaint within one month

If payment isn’t made, file a complaint before the magistrate within one month after the 15 days end. The court can accept a late complaint if you show sufficient cause for the delay, but don’t count on it.

6. Where to file

Since the 2015 amendment, the complaint is filed in the court with jurisdiction over the branch of the payee’s bank where the cheque was delivered for collection, that is, where you hold your account.

Worked example: a ₹2 lakh cheque bounce

For a ₹2,00,000 cheque, the court can order interim compensation of up to ₹40,000 (20%) during the trial. On conviction, the fine can go up to ₹4,00,000. If the accused appeals, the appellate court can require a deposit of at least 20% of the fine or compensation awarded (Section 148).

Tip: mark the 30-day notice deadline in your calendar the day the cheque bounces. Waiting “to see if they pay anyway” is the most common reason people lose their Section 138 remedy.

Defences courts consider in a cheque bounce case

Once the drawer admits signing the cheque, the law presumes it was issued for a debt or liability (Section 139). The accused must then raise a probable defence. Common ones:

• No legally enforceable debt on the date the cheque was presented. Note that a “security cheque” isn’t automatically a defence. The Supreme Court has held that if the debt had become due when a security cheque was presented, Section 138 can apply.
• Notice not served, or sent to a wrong address. Notice sent by registered post to the correct address is generally presumed served, even if it’s refused.
• Limitation: the notice or complaint was out of time, with no sufficient cause shown.
• Debt already paid or the amount on the cheque is higher than what was owed.

“Stop payment” is not an escape. A cheque returned because the drawer stopped payment can still attract Section 138 if there was a debt and enough money wasn’t available or arranged.

If you issued the cheque

• If you get a demand notice, pay within 15 days if you owe the money. That ends the matter with no offence.
• If you dispute the debt, reply to the notice in writing, giving your reasons, and keep evidence.
• Once a case is filed, settling early is usually cheapest. Courts may impose costs when cases are compounded at later stages.

Common cheque bounce mistakes

• Sending the notice to an old address without checking it reached the drawer.
• Missing the 30-day notice window while waiting for payment.
• Not keeping proof of dispatch and delivery of the notice.
• Demanding an amount in the notice different from the cheque amount. The notice should demand the cheque amount.

Our verdict

Section 138 is still a real criminal remedy in 2026, and interim compensation gives it more teeth. But it works only if you follow the timelines exactly. The day a cheque bounces, note the 30-day notice deadline and act on it.

Cheque bounce FAQs

Q: Can a cheque bounce case be settled after filing?
A: Yes. Section 138 offences are compoundable at any stage if both parties agree, including during appeal.

Q: Does Section 138 require intent to cheat?
A: No. It applies if the cheque was for a legally enforceable debt and bounced for insufficient funds, exceeding the arrangement, or similar reasons, whatever the intent. Cheating is a separate offence.

Q: Which court has jurisdiction?
A: The court with jurisdiction over the branch of the payee’s bank where the cheque was delivered for collection, under the 2015 amendment.

Q: Can a company’s directors be prosecuted?
A: Yes. Under Section 141, the company and the persons in charge of and responsible for its business when the offence was committed can be held liable. Independent and nominee directors are generally protected unless specific involvement is shown.

Q: Can I also file a civil suit?
A: Yes. A civil recovery suit, including a summary suit under Order XXXVII of the Code of Civil Procedure, is a separate remedy and can run alongside the criminal case.

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📎 Sources: Negotiable Instruments Act, 1881 (Sections 138-148). This article is general information, not legal advice. Consult a lawyer for your case, especially on deadlines.