Cheque Bounce Proceedings Under Section 138: A Practical Overview

This article is general information only, not legal advice, and not solicitation of work. It should not be relied upon as a substitute for advice on your specific facts.

The Basic Framework

Section 138 of the Negotiable Instruments Act, 1881 makes it an offence for a cheque to be dishonoured due to insufficient funds or because the amount exceeds what is arranged with the bank, provided the cheque was issued in discharge of a legally enforceable debt or liability. It is a criminal provision, but one built around a very specific, document-driven procedure.

The Mandatory Timeline

The process has firm deadlines. The cheque must be presented to the bank within its validity period, typically three months. Once dishonoured, the payee has thirty days to send a written demand notice to the drawer. The drawer then has fifteen days from receipt of that notice to make payment. Only if payment is not made within that window does a cause of action for a criminal complaint arise, and the complaint itself must then be filed within one month of that failure.

Common Defences

Typical defences include disputing that a legally enforceable debt existed at all, arguing the cheque was issued as security rather than in discharge of a debt, challenging whether the statutory notice was validly served, or showing that payment was in fact made within the fifteen-day window. Courts do presume, once dishonour and a valid notice are shown, that the cheque was issued for a debt, so displacing that presumption requires credible evidence, not a bare denial.

Why the Process Trips People Up

Because so much turns on dates, missing the thirty-day window to send a notice, or filing a complaint after the one-month period, can be fatal to an otherwise strong case. Anyone holding a dishonoured cheque should treat the notice deadline as the first and most urgent step, not an afterthought.

This note is prepared by our Criminal Litigation team. If you are dealing with a related situation, get in touch with us.