A bounced cheque is one of the most common money disputes in India. Section 138 of the Negotiable Instruments Act, 1881 makes dishonour of a cheque for insufficient funds (or because it exceeds the arrangement with the bank) a criminal offence, if certain conditions and time limits are followed. Missing a deadline can weaken or even end the case, so the timeline matters.
Conditions for a case under Section 138
- The cheque was issued to discharge a legally enforceable debt or liability.
- It was presented to the bank within its validity period (currently three months from the date on the cheque).
- It was returned unpaid, for example “funds insufficient” or “exceeds arrangement”.
- A written legal notice was sent and the amount was not paid within the time allowed.
Step 1: Collect the return memo
When the cheque bounces, your bank gives a cheque return memo stating the reason. Keep the original cheque and the memo safely. A cheque can be presented again within its validity period if you expect it to be honoured.
Step 2: Send a legal notice within 30 days
The payee must send a written demand notice to the drawer within 30 days of receiving information from the bank about the dishonour. The notice should mention the cheque details, the dishonour and a demand for payment of the cheque amount. Keep postal receipts and tracking proof.
Step 3: Wait 15 days for payment
The drawer gets 15 days from receiving the notice to pay. If payment is made in this period, no offence is complete. If payment is not made, the cause of action arises after these 15 days end.
Step 4: File the complaint within one month
The complaint must be filed within one month from the date the cause of action arises. The court may condone delay if sufficient cause is shown, but it is safer to file on time.
Which court has jurisdiction?
Under Section 142(2) of the NI Act, the complaint is filed in the court within whose local limits the payee’s bank branch (where the cheque was delivered for collection through the payee’s account) is situated. In Delhi, these cases are heard by the Magistrate courts in the district courts, including Tis Hazari.
Interim compensation and punishment
- Interim compensation: Under Section 143A, the court may direct the accused to pay interim compensation of up to 20% of the cheque amount during the trial.
- Punishment: On conviction, the court may impose imprisonment of up to two years, or a fine of up to twice the cheque amount, or both.
- Company cheques: Under Section 141, persons in charge of and responsible for the conduct of the company’s business may also be proceeded against.
Documents you will need
- Original cheque and bank return memo
- Copy of the legal notice, postal receipts and tracking report
- Proof of the debt: agreement, invoices, ledger, messages or emails
- Your identity proof and bank statement showing the presentation
Settlement is possible at any stage, and courts often refer such cases to mediation. Related reading: criminal law matters and arbitration and conciliation.
If you need guidance on your specific situation, you may contact the office of Advocate Rohit Grewal at Tis Hazari Courts, Delhi, through the contact page.
Disclaimer: This article is for general information only and is not legal advice. The law and its application depend on the facts of each case. For advice on your matter, please consult an advocate.