Cheque Bounce Under Section 138: The Deadlines That Decide the Case

A bounced cheque can be more than an inconvenience. Under Indian law, when a cheque given to pay a debt is returned unpaid, the person who issued it may face a criminal case. But the law protects the holder only if a short chain of deadlines is followed in the right order. Miss one link, and the complaint can fail even when the money is plainly owed.

What Section 138 covers

Section 138 of the Negotiable Instruments Act, 1881 makes it an offence when a cheque, issued to discharge a legally enforceable debt or liability, is returned by the bank because the account has insufficient funds or the amount exceeds what the drawer has arranged with the bank.¹ A cheque given purely as a gift or for a debt that the law does not recognise is outside this section. On conviction, the court may impose imprisonment of up to two years, a fine of up to twice the cheque amount, or both.¹

The four deadlines, step by step

• Presenting the cheque: it must reach the bank within six months of its date or within its validity period, whichever is earlier.¹ Since 1 April 2012, banks treat cheques as valid for three months from their date, so in practice the window is three months.²
• Sending the demand notice: the payee must send a written notice to the drawer demanding the amount within thirty days of being informed by the bank that the cheque was returned.¹
• Giving time to pay: the drawer then has fifteen days from receiving the notice to pay. The offence is complete only if payment is not made in that period.¹
• Filing the complaint: the complaint must be filed within one month after the fifteen-day period ends. A court may accept a late complaint if the complainant shows sufficient cause for the delay.³

Where the case is filed

Since the 2015 amendment, Section 142(2) generally places the case in the court within whose area the payee's bank branch is located, where the cheque was deposited for collection through the payee's account.³ The Supreme Court in Bridgestone India Pvt. Ltd. v. Inderpal Singh (24 November 2015) held that this amended rule applies even to cases that were pending when it came in.⁴ Only a Metropolitan Magistrate or a Judicial Magistrate of the First Class can try these cases.³

The presumption and how it can be answered

Section 139 lets the court presume that the cheque was given for a debt or liability. In Rangappa v. Sri Mohan (2010) 11 SCC 441, a three-judge bench of the Supreme Court explained that this presumption is rebuttable, and that the accused need only raise a probable defence on a preponderance of probabilities, not prove it beyond doubt.⁵ Inconsistent amounts, an unexplained source of funds or missing records on the complainant's side can all weigh in that assessment.

Interim compensation, appeals and settlement

Amendments made in 2018 added two money-related safeguards. Under Section 143A, the trial court may direct the drawer to pay interim compensation of up to 20 per cent of the cheque amount while the case is pending. Under Section 148, an appellate court hearing the drawer's appeal against conviction may require a deposit of at least 20 per cent of the fine or compensation awarded.⁶ Both amounts must be refunded with interest if the drawer is ultimately acquitted.⁶ Section 147 also makes offences under the Act compoundable, which means the parties can settle the matter even after the case has begun.⁷

Practical points

• Note the date on the bank's return memo; the thirty-day notice period runs from when you receive that information.
• Send the notice by a method that gives proof of dispatch and delivery, and keep copies.
• Keep the original cheque, the return memo and any documents showing the underlying debt.
• Count the fifteen days from the date the drawer receives the notice, not the date it was sent.
• If you issued a cheque that bounced, payment within the fifteen-day window prevents the offence from arising.