Cheque Bounce — What to Do, Penalty & Legal Action Guide

What is a Cheque Bounce?

A cheque bounce (also called cheque dishonour) happens when a bank refuses to process a cheque presented for payment. The bank returns the cheque unpaid and issues a Cheque Return Memo stating the reason for dishonour.

Cheque bounce is a criminal offence under Section 138 of the Negotiable Instruments Act, 1881 if the cheque was issued for a legally enforceable debt or liability.

Why Do Cheques Bounce? Common Reasons

1. Insufficient Funds

The most common reason — the drawer's account doesn't have enough balance to cover the cheque amount.

2. Signature Mismatch

The signature on the cheque doesn't match the specimen signature registered with the bank.

3. Overwriting or Corrections

Any overwriting, cutting, or corrections on the cheque without the drawer's counter-signature leads to rejection.

4. Stale or Post-Dated Cheque

A cheque is valid for 3 months from the date of issue. If presented after that, the bank rejects it as a "stale cheque." Similarly, a post-dated cheque presented before its date will be returned.

5. Account Closed or Frozen

If the drawer's bank account has been closed, frozen, or has a stop-payment instruction, the cheque bounces.

6. Other Technical Reasons

• Amount in words and figures doesn't match
• Cheque is torn, damaged, or mutilated
• Mismatch in account number or payee name
• Drawing amount exceeds overdraft limit

Bank Charges for Cheque Bounce

Banks charge penalties to both the cheque issuer (drawer) and the person depositing it (payee). Charges vary by bank but typical ranges are:

Note: Charges vary by bank and account type. Check your bank's schedule of charges. Frequent cheque bounces can affect your CIBIL credit score and the bank may even close your account.

What to Do if YOUR Cheque Bounced (For the Drawer)

If a cheque you issued has bounced, act immediately:

1. Check the reason — Ask your bank for the Cheque Return Memo to understand why it bounced
2. Arrange funds — If it bounced due to insufficient funds, deposit money into your account immediately
3. Inform the payee — Contact the payee, explain the situation, and request them to re-present the cheque or offer an alternative payment (NEFT/UPI/cash)
4. Pay within 15 days — If the payee sends a legal notice under Section 138, you must pay the cheque amount within 15 days of receiving the notice to avoid criminal proceedings
5. Keep records — Save all communication, bank statements, and payment receipts as evidence

Important: Ignoring a legal notice for cheque bounce can lead to criminal prosecution, imprisonment up to 2 years, and a fine of up to twice the cheque amount.

What to Do if Someone's Cheque to You Bounced (For the Payee)

If a cheque you received and deposited has bounced:

1. Collect the Cheque Return Memo — Get this from your bank; it states the reason for dishonour
2. Contact the drawer — Inform them about the bounce and request immediate payment
3. Re-present the cheque — You can re-present the cheque within 3 months of the cheque date (banks typically allow re-presentation once or twice)
4. Send a legal notice — If the drawer doesn't pay, send a written demand notice within 30 days of receiving the Cheque Return Memo
5. Wait 15 days — The drawer gets 15 days from receipt of notice to make payment
6. File a criminal complaint — If still unpaid after 15 days, file a complaint under Section 138 within 30 days of the expiry of the 15-day notice period

Section 138 of the Negotiable Instruments Act — Explained

Section 138 makes cheque bounce a criminal offence when:

• The cheque was drawn for discharge of a legally enforceable debt or liability
• The cheque was presented within 3 months of issue (or its validity period)
• The cheque was returned by the bank as unpaid (for any reason)
• The payee sent a demand notice within 30 days of receiving the return memo
• The drawer failed to pay within 15 days of receiving the notice

Penalty Under Section 138

The complaint is filed in the court having jurisdiction where the cheque was presented for payment (i.e., the payee's bank location).

How to Send a Legal Notice for Cheque Bounce

When to Send

Within 30 days of the date you receive the Cheque Return Memo from your bank.

What to Include in the Notice

Your legal notice must contain:

1. Your details — Full name, address of the payee
2. Drawer's details — Full name and address of the cheque issuer
3. Cheque details — Cheque number, date, amount, bank name, and branch
4. Reason for cheque — What debt/liability the cheque was issued for
5. Dishonour details — Date of presentation, date of return, reason stated in return memo
6. Demand for payment — Clear demand to pay the cheque amount within 15 days of receiving the notice
7. Warning — Statement that criminal proceedings under Section 138 will be initiated if payment is not made

How to Send

• Send via Registered Post with Acknowledgement Due (RPAD) or Speed Post — this serves as proof of delivery
• You may also send via courier, but RPAD is legally safest
• Keep a copy of the notice and postal receipt
• You can draft the notice yourself or hire a lawyer (recommended for large amounts)

Sample Legal Notice Format

LEGAL NOTICE UNDER SECTION 138 OF NEGOTIABLE INSTRUMENTS ACT, 1881

To,
[Drawer's Name]
[Drawer's Address]

From,
[Your Name]
[Your Address]

Date: [Date]

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

Sir/Madam,

Under instructions from my client [Your Name], I hereby serve this
legal notice upon you as under:

1. You issued Cheque No. [Number] dated [Date] for ₹[Amount]
   drawn on [Bank Name], [Branch], in favour of my client towards
   discharge of your liability of ₹[Amount].

2. The said cheque was presented for payment on [Date] but was
   returned unpaid by the bank with the remark "[Reason from memo]."

3. You are hereby called upon to pay the sum of ₹[Amount] within
   15 days of receipt of this notice, failing which my client shall
   initiate criminal proceedings under Section 138 of the Negotiable
   Instruments Act, 1881, at your risk, cost, and consequence.

[Signature]
[Your Name / Advocate Name]

Filing a Criminal Complaint Under Section 138 — Step-by-Step

If the drawer does not pay within 15 days of receiving your legal notice:

Step 1: Prepare Documents

Gather the following:

• Original bounced cheque
• Cheque Return Memo from bank
• Copy of the legal notice sent
• Postal receipt and acknowledgement (proof of delivery)
• Bank statement showing the cheque deposit and return
• Any agreement, invoice, or proof of the underlying debt

Step 2: Draft the Complaint

• File a written complaint (through a lawyer) in the Magistrate's Court having jurisdiction where the cheque was presented (your bank's location)
• The complaint must be filed within 30 days of the expiry of the 15-day notice period (i.e., within 45 days of the drawer receiving the notice)

Step 3: File in Court

• Submit the complaint with all supporting documents
• Pay the court fee (varies by state, typically ₹200–₹500)
• The court will examine the complaint and may issue summons to the drawer

Step 4: Court Proceedings

• The drawer will be summoned to appear before the Magistrate
• If found guilty, the court can impose:
  • Imprisonment up to 2 years
  • Fine up to twice the cheque amount
  • Compensation to the payee under Section 357 CrPC

Step 5: Appeal (If Needed)

• Either party can appeal the Magistrate's decision to the Sessions Court within 30 days
• Further appeal is possible in the High Court

Tip: Many cheque bounce cases are settled out of court once the drawer receives the court summons. Courts also encourage mediation and settlement.

Important Tips

1. Time limits are strict — Missing the 30-day window for sending notice or the 30-day window for filing complaint will make your case invalid
2. Keep all originals — Never hand over the original cheque or return memo without keeping certified copies
3. Partial payment doesn't help — If the drawer pays only part of the amount during the notice period, you can still proceed under Section 138
4. Multiple cheques — Each bounced cheque is a separate offence; file separate complaints for each
5. Company cheques — If a company's cheque bounces, the directors responsible for the company's affairs can also be prosecuted

Frequently Asked Questions

Q1: Can a cheque bounce case be filed for a gift cheque?

No. Section 138 only applies when the cheque was issued for a legally enforceable debt or liability. Gift cheques, donations, or cheques without consideration are not covered.

Q2: What if the legal notice is returned undelivered?

If the notice is returned as "refused" or "not claimed," it is still considered legally served. However, if returned as "addressee not found" or "wrong address," you may need to try the correct address. Courts have held that refusal to accept amounts to valid service.

Q3: Can I file a cheque bounce case if the cheque is more than 3 months old?

No. The cheque must be presented within 3 months of the date on the cheque. If you missed this window, the cheque is considered stale and Section 138 does not apply.

Q4: Is it compulsory to hire a lawyer for a Section 138 case?

It's not legally mandatory — you can file the complaint yourself. However, hiring a lawyer is highly recommended as the process involves specific legal drafting and court procedures.

Q5: How long does a cheque bounce case take in court?

Typically 1 to 3 years, depending on the court's workload and complexity. The Supreme Court has directed that Section 138 cases should be concluded within 6 months, but delays are common. Many cases settle once summons are issued.

Q6: Can the drawer be arrested immediately after filing the complaint?

No. The court first issues a summons. The drawer gets the opportunity to appear, plead, and defend. Arrest or imprisonment only happens after conviction by the court.

Q7: What if the drawer issues a fresh cheque that also bounces?

Each bounced cheque is a separate offence. You must send a fresh legal notice for the new cheque and follow the same process. You can file a separate complaint for each.

Q8: Can I also file a civil suit along with the criminal complaint?

Yes. You can file a civil recovery suit for the cheque amount along with interest and damages, in addition to the criminal complaint under Section 138. Both can run simultaneously.

This guide is for informational purposes only and does not constitute legal advice. CitizenNest is an independent platform and is not affiliated with any government body. For legal matters, consult a qualified advocate. Information is based on the Negotiable Instruments Act, 1881 and RBI guidelines as of March 2026.