Cheque bounce matters
Complaints and defence under Section 138 of the Negotiable Instruments Act, 1881, for cheques dishonoured in Mumbai and Navi Mumbai — from the statutory notice through the summary trial to appeal.
Section 138 matters for individuals and businesses, on either side of the complaint.
Section 138 is made out only if three periods are kept: the cheque presented within its validity, the demand notice given within 30 days of the bank's intimation, and the complaint filed within one month of the drawer's 15 days expiring. A missed period is usually what decides these matters, on either side.
Describe your matterThe provisions, the periods and the procedure, in order.
Last reviewed 23 September 2026
NI Act, 1881 — s. 138
A cheque returned unpaid is not by itself an offence. Section 138 is attracted where a cheque drawn on an account maintained by the drawer, given to discharge a debt or other liability in whole or in part, is returned unpaid because the funds in the account are insufficient or the amount exceeds the arrangement with the bank.
The offence is punishable with imprisonment which may extend to two years, or with fine which may extend to twice the amount of the cheque, or with both. It is tried by a magistrate on a complaint, not on a police report, so the payee brings the case rather than the state.
A cheque returned for a reason other than funds — a stopped payment, a closed account, a signature that does not match — has been held to fall within the section where the underlying position is the same, and each of those turns on its own facts.
NI Act, 1881 — ss. 138–142
Section 138 creates the offence and sets out, in its proviso, the three conditions that must be satisfied before a complaint can be made.
Section 139 raises a presumption that the holder received the cheque for the discharge of a debt or liability. The presumption is rebuttable, and the drawer discharges it on a preponderance of probabilities rather than beyond reasonable doubt.
Section 141 governs offences by companies, making the persons in charge of and responsible for the conduct of the business liable along with the company. Section 142 sets who may complain, the period for doing so, and the court that has jurisdiction.
NI Act, 1881 — s. 138 proviso, s. 142(1)(b)
Four periods run one after the other, and each begins only when the one before it ends. They are the whole of the procedural case.
NI Act, 1881 — s. 138 proviso (b)
The notice is the document the case is built on. It must demand the amount of the cheque, be in writing, and be given within 30 days of the payee receiving the bank's intimation. A notice that demands more than the cheque, or that is sent before the return memo, is open to attack.
Service matters as much as content. The notice is ordinarily sent to the drawer's address by registered post with acknowledgement due and by email or courier alongside it, and the postal receipt and tracking are kept, because refusal or non-collection is treated as service.
A drawer who receives one has 15 days in which paying ends the matter. Where the demand is disputed, the reply is written on the footing that it will be produced at trial, because it will be: an unanswered notice, and an answer inconsistent with the defence later taken, are both used in evidence.
NI Act, 1881 — ss. 142, 143
The complaint is filed before the magistrate having jurisdiction. Since the 2015 amendment, that is the court where the branch of the bank at which the payee maintains the account is situated where the cheque was delivered for collection, and where it was presented directly, the court where the drawee branch is situated.
Section 143 provides for trial as a summary case, and directs that the trial be conducted as expeditiously as possible, with an endeavour to conclude it within six months of the complaint being filed.
The complainant's evidence may be given on affidavit. The drawer is then examined, evidence is led on the rebuttal of the Section 139 presumption, and the matter goes to final argument. Section 143A allows the court to order interim compensation of up to twenty per cent of the cheque amount before the trial concludes.
NI Act, 1881 — s. 139
The presumption under Section 139 means the drawer opens the defence, not the complainant. The question at trial is usually whether the drawer has raised a probable defence, not whether the complainant has proved the debt.
The defences ordinarily available are that the cheque was not issued for a legally enforceable debt or liability; that the debt was barred by limitation when the cheque was given; that one of the three periods in the proviso was not kept; that the notice was defective or not served; that the cheque was given as security and the condition did not arise; or that it was filled in or misused after being given blank.
Which of these is open depends on the documents, not on preference. Bank statements, the ledger between the parties, the correspondence and the reply to the notice are what a probable defence is built from.
NI Act, 1881 — s. 147
Every offence under the Act is compoundable under Section 147, so a Section 138 matter can be closed by agreement between the parties at any stage, including in appeal, with the court's permission.
The Supreme Court has laid down that compounding at a later stage attracts a graded cost, so the stage at which settlement is reached affects what it costs. Settling early therefore differs from settling after evidence, in money as well as in time.
A settlement is recorded in terms that deal with the cheque, the amount, the mode and dates of payment, and what follows if an instalment is missed, so that the matter does not have to be reopened on the same facts.
NI Act, 1881 — s. 148
An order of conviction and sentence is appealable, as is an order of acquittal, and the sessions court ordinarily hears the appeal from a magistrate's order in these matters.
Section 148 provides that in an appeal by the drawer against conviction, the appellate court may order a deposit of a minimum of twenty per cent of the fine or compensation awarded by the trial court, payable within sixty days, extendable by a further thirty days on the court's direction.
Revision lies against orders that are not appealable, and the grounds are narrower than in appeal. The record of the trial court decides what is arguable, which is why what is said and produced at trial matters at this stage too.
How a Section 138 matter is run, on either side of it.
Short answers on the points that decide most of these matters.
It is a criminal complaint made when a cheque given to discharge a debt or liability is returned unpaid for insufficient funds, the payee has demanded the amount in writing within 30 days of the bank's intimation, and the drawer has not paid within 15 days of receiving that demand. It is punishable with imprisonment which may extend to two years, or a fine which may extend to twice the cheque amount, or both.
One month from the date the cause of action arises, which is the day the drawer's 15 days from the notice expire. Under the proviso to Section 142(1)(b) a court may take cognizance after that period if the complainant satisfies it that there was sufficient cause for not filing in time.
Before the magistrate in whose jurisdiction the relevant bank branch is situated. Since the 2015 amendment to Section 142(2), that is the branch where the payee maintains the account when the cheque was delivered for collection, and the drawee branch where it was presented directly. For matters arising in Mumbai and Navi Mumbai that commonly means the courts at Kurla, Andheri, Vikhroli or Vashi.
Yes. Section 147 makes every offence under the Act compoundable, so the matter can be closed by agreement at any stage, including in appeal, with the court's permission. The Supreme Court has directed a graded cost for compounding at later stages, so the stage at which it is done affects what it costs.
That the cheque was not issued for a legally enforceable debt or liability; that the debt was time-barred when the cheque was given; that one of the periods in the proviso to Section 138 was not kept; that the notice was defective or not served; or that the cheque was given as security, or completed after being handed over blank. Because Section 139 raises a presumption in the holder's favour, the drawer has to raise a probable defence, on a preponderance of probabilities.
Section 143 directs that the trial be conducted as expeditiously as possible, with an endeavour to conclude it within six months of the complaint being filed. How long a particular matter takes depends on service on the drawer, the evidence led and the board of the court hearing it, and no period can be promised.
Section 143A allows the trial court to order the drawer to pay interim compensation of up to twenty per cent of the cheque amount, payable within sixty days and extendable by a further thirty. On appeal against conviction, Section 148 allows the appellate court to order a deposit of a minimum of twenty per cent of the fine or compensation awarded.
The rest of the work the firm is instructed on.
A question about a cheque
or a notice?
Say what the cheque was for, what the return memo says and what dates are on the notice. You will be told what the section requires on those facts and what the next step is.
