Cheque Bounce Case Under Section 138 — Complete Legal Guide

A cheque bounce (dishonour) is a criminal offence under Section 138 of the Negotiable Instruments Act, 1881. If someone has given you a cheque that bounced due to insufficient funds or any other reason, you have the legal right to file a criminal complaint and recover your money — often with penalty.

This guide covers the step-by-step process to file a cheque bounce case in India, the demand notice format, court procedure, penalties, timeline, lawyer fees, and settlement options.

What Is a Cheque Bounce Case?

When a cheque issued for a legally enforceable debt or liability is returned unpaid by the bank, the payee (person who received the cheque) can take legal action against the drawer (person who issued the cheque) under Section 138 of the NI Act.

Common reasons for cheque dishonour:

• Insufficient funds in the account
• Account closed
• Signature mismatch
• Overwriting or alterations on the cheque
• Stop payment instructions by the drawer
• Cheque presented after validity period (3 months)

Note: Only cheques returned for "insufficient funds" or "exceeds arrangement" attract criminal liability under Section 138. Other reasons (signature mismatch, etc.) may only support civil claims.

Who Can File a Cheque Bounce Case?

• The payee (person named on the cheque) or the holder in due course
• The cheque must have been issued for discharge of a legally enforceable debt or liability
• The cheque must have been presented within its validity period (3 months from date of issue)
• The cheque must have been returned unpaid by the bank

Step-by-Step Process to File a Cheque Bounce Case

Step 1: Get the Bank Memo (Cheque Return Memo)

When the bank returns the cheque, it issues a Cheque Return Memo stating the reason for dishonour. Collect this memo — it is your primary evidence.

Step 2: Send a Legal Demand Notice (Within 30 Days)

You must send a written demand notice to the cheque issuer within 30 days of receiving the cheque return memo.

Demand Notice Must Include:

• Details of the cheque (number, date, amount, bank)
• Reason for dishonour as per bank memo
• Demand to pay the cheque amount within 15 days of receiving the notice
• Statement that legal action will be taken if payment is not made

How to Send:

• Send via Registered Post with Acknowledgment Due (RPAD) or Speed Post
• Keep a copy of the notice and postal receipt as proof
• You may also send via courier, but RPAD is strongest evidence

Step 3: Wait for 15 Days

After the drawer receives the notice, they have 15 days to make the payment. If they:

• Pay within 15 days → Matter resolved, no case needed
• Do not pay within 15 days → You can file a criminal complaint

Step 4: File Criminal Complaint (Within 30 Days of Expiry)

File a complaint in the Metropolitan Magistrate / Judicial Magistrate First Class court having jurisdiction.

Time limit: The complaint must be filed within 30 days of the expiry of the 15-day notice period (i.e., within 45 days of the notice being received).

Documents Required:

1. Original cheque (bounced)
2. Cheque return memo from bank
3. Copy of demand notice sent
4. Postal receipt / tracking proof of notice delivery
5. Acknowledgment card (if RPAD)
6. Bank statement showing cheque deposit and return
7. Any underlying agreement, invoice, or document proving the debt
8. Affidavit supporting the complaint

Step 5: Court Proceedings

1. Court examines the complaint on oath and may issue summons to the accused
2. Accused appears — court may attempt reconciliation
3. Notice of accusation is served; accused pleads guilty or not guilty
4. Trial — Evidence is presented by both sides
5. Judgment — Conviction or acquittal

Penalty for Cheque Bounce

If convicted under Section 138, the court can impose:

The court typically orders the fine amount to be paid as compensation to the complainant.

Timeline for a Cheque Bounce Case

Important: Under the amended NI Act, courts are expected to complete trial within 2 years. Some courts have dedicated cheque bounce courts for faster disposal.

Lawyer Fees for Cheque Bounce Case

Lawyer fees vary based on location and case complexity:

Additional costs:

• Court fees: ₹200 – ₹500 (varies by state)
• Notice drafting: ₹1,000 – ₹3,000
• If hiring through legal aid (NALSA), service may be free

Tip: For cheques above ₹5 lakh, consider hiring an experienced criminal lawyer. For smaller amounts, legal aid services or compromise may be more cost-effective.

Compromise and Settlement

The cheque bounce case can be settled at any stage before judgment:

• Before filing case: If the drawer pays within 15 days of notice
• After filing case: The accused can approach the complainant for compromise. If agreed, a joint application for compounding the offence is filed
• Lok Adalat: Cheque bounce cases are commonly settled in Lok Adalats — free of cost and binding

Benefits of settlement:

• Faster recovery of money
• No criminal record for the accused
• Saves time and legal costs for both parties

Demand Notice Format (Sample)

LEGAL DEMAND NOTICE UNDER SECTION 138 OF NEGOTIABLE INSTRUMENTS ACT, 1881

To,
[Name and Address of Cheque Issuer]

Subject: Legal Notice for Dishonour of Cheque No. [Number]

Dear Sir/Madam,

Under instructions from my client [Your Name], I hereby serve this notice:

1. You issued Cheque No. [Number] dated [Date] for ₹[Amount] 
   drawn on [Bank Name], Branch [Branch Name].
2. The cheque was presented for encashment on [Date] but was 
   returned unpaid with the remark "[Bank's Reason]".
3. You are liable to pay the said amount under Section 138 of 
   the Negotiable Instruments Act, 1881.
4. You are hereby called upon to pay ₹[Amount] within 15 days 
   of receipt of this notice.
5. Failure to pay will result in criminal proceedings being 
   initiated against you.

[Signature]
[Advocate Name / Your Name]
[Date]

Important Tips

1. Never delay the demand notice — you only have 30 days from the cheque return memo date
2. Keep all original documents safe — original cheque, bank memo, notice copies, postal receipts
3. Send notice to the correct address — the address on the cheque or known address of the drawer
4. Even if notice is refused/returned, it is considered served if sent to the correct address
5. Consider settlement first — courts encourage compromise in cheque bounce cases

FAQs

Q1: Can I file a cheque bounce case if the cheque was a gift?

No. Section 138 only applies to cheques issued for a legally enforceable debt or liability. Gift cheques are not covered.

Q2: What if the drawer has closed the bank account?

You can still file a case. Closing the account after issuing a cheque does not absolve the drawer of liability.

Q3: Can I file both civil and criminal cases for a bounced cheque?

Yes. You can file a criminal complaint under Section 138 and a separate civil suit for recovery of money. Both can proceed simultaneously.

Q4: What happens if the accused doesn't appear in court?

The court can issue a bailable warrant, and if still not appearing, a non-bailable warrant. In extreme cases, the court can proceed ex-parte.

Q5: Can a company director be held liable for a company's bounced cheque?

Yes. Under Section 141 of the NI Act, every person in charge of the company at the time of the offence can be held liable.

Q6: Is there a minimum cheque amount for filing a case?

No. There is no minimum amount. You can file a case for any cheque amount, though practical costs should be considered.

Q7: Can the case be filed online?

Filing is primarily done at the physical court. However, some courts accept e-filing through the eCourts portal. Check your local court's facility.

Disclaimer: This guide is for informational purposes only. CitizenNest is not affiliated with any government body. Consult a qualified lawyer for legal advice specific to your situation. Laws and procedures may vary by state and are subject to change.