A dishonoured cheque is one of the most common legal disputes in India. Section 138 of the Negotiable Instruments Act, 1881 makes it a criminal offence, but only if the payee follows a strict sequence of steps and deadlines. Missing a single deadline can defeat an otherwise strong case.
When the offence is made out
All of these conditions must be met:
- The cheque was issued to discharge, in whole or in part, a legally enforceable debt or liability. A cheque given as a gift or donation does not qualify.
- It was presented to the bank within its validity period, currently three months from the date on the cheque.
- It was returned unpaid for insufficient funds or because it exceeded the arrangement with the bank. Courts have held that returns marked "account closed", "payment stopped" or "signature differs" can also attract Section 138 in appropriate cases.
- The payee sent a written demand notice within 30 days of receiving information of the dishonour from the bank.
- The drawer failed to pay within 15 days of receiving the notice.
The timeline at a glance
| Step | Deadline |
|---|---|
| Present the cheque | Within 3 months of the cheque's date |
| Send the demand notice | Within 30 days of receiving the bank's return memo |
| Drawer's time to pay | 15 days from receipt of notice |
| File the complaint | Within 1 month after the 15-day period expires |
A court can condone a delay in filing the complaint if sufficient cause is shown, under the proviso to Section 142(1)(b). The earlier deadlines are harder to rescue, so treat them as fixed.
To work out your own dates, use our cheque bounce deadline calculator.
The demand notice
The notice should state the cheque number, date, amount and bank, the date and reason of dishonour, and demand payment of the cheque amount within 15 days. It should be sent by a method that gives proof of delivery, such as registered post with acknowledgement. Email or messaging may be used as additional channels. A notice that demands a materially different amount from the cheque can be held defective.
Where to file
Under Section 142(2), the complaint is filed before the Magistrate within whose jurisdiction the payee's bank branch (where the payee maintains the account through which the cheque was presented) is located. This lets payees file in their own city, even if the drawer lives elsewhere.
Presumption in favour of the payee
Under Section 139, the court presumes that the cheque was issued for a legally enforceable debt. The drawer must rebut this presumption, for example by showing that no debt existed or that a blank signed cheque was misused. The drawer does not need to prove this beyond reasonable doubt, but must raise a probable defence.
Procedure and speed
- Cases are generally tried summarily (Section 143), which is meant to be quick.
- The complainant's evidence can be given on affidavit (Section 145).
- The court can order the accused to pay interim compensation of up to 20% of the cheque amount while the trial is pending (Section 143A).
- If the accused is convicted and appeals, the appellate court can require a deposit of at least 20% of the fine or compensation (Section 148).
Punishment
On conviction, the court can impose imprisonment of up to two years, a fine of up to twice the cheque amount, or both. In practice, courts usually focus on compensating the payee.
Settlement
The offence is compoundable (Section 147), so the parties can settle at any stage, including in appeal. Courts encourage settlement, and many cases end through mediation or Lok Adalat.
Companies and firms
When a company or firm issues the cheque, the company is the principal accused. Directors or partners who were in charge of and responsible for the conduct of its business at the relevant time can also be prosecuted under Section 141. The complaint must say specifically how each person was responsible.
Key takeaways
- Present within 3 months, send notice within 30 days, wait 15 days, then file within 1 month.
- File where your own bank branch is located.
- The law presumes a legally enforceable debt. The drawer has to rebut it.
- Interim compensation of up to 20% can be ordered during the trial.
