How to File a Cheque Bounce Case Under Section 138 NI Act in India
- Kaustav Chowdhury
- Jul 6
- 5 min read
Updated: 2 days ago
When a cheque issued for a legally enforceable debt is returned unpaid by the bank, the payee has a clear legal remedy under Section 138 of the Negotiable Instruments Act, 1881. Cheque bounce cases are among the most common commercial disputes in Indian courts, with lakhs of cases filed every year. This guide explains the complete step-by-step process to file a cheque bounce complaint, the strict timelines involved, the penalties for the drawer, and the options for settlement.
Understanding Section 138 of the NI Act
Section 138 of the Negotiable Instruments Act, 1881 makes it a criminal offence for a person to issue a cheque that gets dishonoured due to insufficient funds or because the amount exceeds the arrangement with the bank. For the offence to be made out, four conditions must be met: (1) the cheque must have been drawn on a bank account, (2) it must have been issued in discharge of a legally enforceable debt or liability, (3) it must be presented within its validity period of three months from the date on the cheque, and (4) it must be returned unpaid by the bank.
The punishment under Section 138 includes imprisonment for a term up to two years, a fine up to twice the cheque amount, or both. Under Section 143A, inserted by the 2018 Amendment, the court may also direct the accused to pay interim compensation of up to 20% of the cheque amount during the trial itself.
Step-by-Step Process to File a Cheque Bounce Case
Step 1: Present the Cheque Within Three Months. Deposit the cheque at your bank within three months from the date written on it. If it is presented after this period, the bank will return it as stale and no case can be filed.
Step 2: Obtain the Return Memo. Once the bank dishonours the cheque, it issues a return memo (also called a cheque return slip) stating the reason for dishonour. Common reasons include "insufficient funds" or "account closed." Keep this memo safe; it is critical evidence.
Step 3: Send a Legal Demand Notice Within 30 Days. Under Section 138(b), the payee must send a written demand notice to the drawer within 30 days of receiving the return memo. The notice must demand payment of the cheque amount. It should be sent by registered post or speed post (with acknowledgement due) to the drawer's address. If you need guidance on drafting and responding to legal notices, see How to Respond to a Legal Notice in India.
Step 4: Wait 15 Days for Payment. After the drawer receives the notice, the law gives them 15 days to pay. If payment is made within this window, no offence is committed.
Step 5: File a Criminal Complaint Within 30 Days. If the drawer fails to pay within 15 days, the payee must file a complaint before the Judicial Magistrate of First Class (JMFC) or the Metropolitan Magistrate within 30 days from the expiry of the 15-day notice period. Missing this deadline can result in the complaint being dismissed as time-barred.
Where to File and Jurisdiction Rules
Under Section 142(2) of the NI Act (inserted by the 2015 Amendment), the complaint must be filed in the court that has jurisdiction over the place where the branch of the payee's bank is located. In other words, file the case where your bank branch (through which you deposited the cheque for collection) is situated, not where the drawer's bank is located.
Section 143 mandates that cheque bounce cases be tried as summary trials for faster disposal. Courts are expected to complete the trial within six months. The Supreme Court's 2025 directives have further streamlined the process by allowing service of summons through WhatsApp, email, and other electronic means, and by directing District Courts to create online payment facilities so that accused persons can settle cheque amounts at the earliest stage.
Settlement, Compounding, and Interim Compensation
A cheque bounce offence under Section 138 is a compoundable offence. This means the complainant and accused can settle the matter at any stage of the proceedings, with the court's permission. The Supreme Court has held that if a full settlement is reached, the conviction cannot survive (see Supreme Court: Cheque Bounce Conviction Cannot Survive a Full Settlement).
Lok Adalats are a popular forum for resolving cheque bounce disputes. Courts frequently refer pending Section 138 cases to Lok Adalats, where both parties can negotiate a settlement amount. This route saves time and legal costs for both sides.
Under Section 143A of the NI Act, the court may direct the accused to pay interim compensation of up to 20% of the cheque amount. This must be paid within 60 days (extendable by 30 days for valid reasons). If the accused is later acquitted, the complainant must refund the interim compensation with interest.
Documents Required and Practical Tips
To file a cheque bounce case, gather the following documents: (1) the original dishonoured cheque, (2) the bank return memo, (3) a copy of the demand notice sent to the drawer, (4) the postal receipt and acknowledgement card proving the notice was dispatched and received, (5) bank statements showing the cheque was presented and returned, and (6) any underlying agreement, invoice, or document proving the legally enforceable debt.
A few practical points to keep in mind: the demand notice must specify the exact cheque amount; if the amount in the notice does not match the cheque, courts may hold the notice invalid. If you are dealing with a related dispute over unauthorised bank transactions, you may also want to explore the RBI's refund mechanism. For consumer-related disputes, the e-Daakhil consumer complaint process may be relevant.
Related Reading
Key Takeaways
1. A cheque bounce under Section 138 NI Act is a criminal offence punishable with up to two years of imprisonment or a fine of up to twice the cheque amount.
2. Strict timelines apply: send the demand notice within 30 days of the return memo, wait 15 days, and file the complaint within 30 days after the 15-day period expires.
3. File the complaint in the court having jurisdiction over the branch where your (payee's) bank account is maintained.
4. Courts may award interim compensation of up to 20% of the cheque amount under Section 143A.
5. The offence is compoundable; settlement is possible at any stage with the court's permission.
Understanding the process and adhering to the prescribed timelines is essential for a successful cheque bounce complaint. Each step, from presenting the cheque to filing in the correct court, must be completed with care to avoid procedural dismissal.
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