Cheque Bounced? The Section 138 Timeline Every Business Owner Should Know
FundRaksha Legal Team · A bounced cheque feels like a setback. Legally, it is often the opposite. Under Section 138 of the Negotiable Instruments Act, 1881, dishonour of a cheque issued to discharge a debt is a criminal offence, and the law gives the payee a clear, fast path to recovery.
The catch is that the path runs on strict deadlines. Miss one, and you can lose the criminal remedy altogether. This guide walks through the timeline in the order it happens.
When Section 138 applies
Section 138 is available when:
- The cheque was issued to discharge a legally enforceable debt or liability, such as payment for goods supplied or services rendered. A cheque given as a gift or a loan to a friend without any liability does not qualify.
- It was presented to the bank within its validity period, which is three months from the date on the cheque.
- It was returned unpaid, typically for "funds insufficient" or because it exceeds the arrangement with the bank. Courts have also applied Section 138 to returns such as "account closed" and "payment stopped by drawer" when the underlying debt exists.
Keep the original cheque and the bank's return memo. They are the backbone of your case.
The timeline, step by step
Step 1: Send a demand notice within 30 days
Once your bank informs you that the cheque was dishonoured, you have 30 days to send a written demand notice to the drawer asking for payment of the cheque amount.
A good notice:
- identifies the cheque (number, date, amount, bank) and the return memo,
- states the underlying transaction and the debt it was meant to discharge,
- demands payment of the cheque amount within 15 days of receiving the notice,
- is sent in a way you can prove, such as registered post with acknowledgement or speed post with tracking, and ideally by email too.
Step 2: The drawer gets 15 days to pay
The drawer has 15 days from receiving the notice to pay the cheque amount. If they pay within this window, no offence is made out. Many matters end here, which is exactly why the notice must be firm and properly drafted.
Step 3: File the complaint within one month
If the 15 days pass without payment, the cause of action arises. You then have one month to file a criminal complaint before the magistrate.
After the 2015 amendment, the complaint is filed in the court with jurisdiction over the place where your bank branch (where you presented the cheque or maintain your account) is located. That means you generally file in your own city, not the drawer's.
Courts can condone a short delay in filing if there is sufficient cause, but you should never plan around that.
What the drawer faces
- Punishment: imprisonment of up to two years, a fine of up to twice the cheque amount, or both.
- Interim compensation: under Section 143A, the court may direct the drawer to pay interim compensation of up to 20% of the cheque amount while the case is pending.
- Compounding: the offence can be settled between the parties at any stage (Section 147). In practice, the prospect of a criminal case pushes many drawers to settle.
A quick reference
| Event | Deadline |
|---|---|
| Present the cheque | Within 3 months of the cheque date |
| Send demand notice | Within 30 days of learning of dishonour |
| Drawer's time to pay | 15 days from receiving the notice |
| File the complaint | Within 1 month after those 15 days expire |
Common mistakes to avoid
- Sending a vague notice. A notice that demands a different amount from the cheque amount, or never clearly demands payment, can be challenged. Demand the cheque amount clearly; claim other amounts separately.
- Not keeping proof of delivery. If the drawer says they never received the notice, you need the postal receipt and tracking record.
- Re-presenting without a plan. You can re-present a cheque within its validity, and a later dishonour starts a fresh 30-day window. But count the days carefully and keep every return memo.
- Confusing the civil claim. Section 138 is about the cheque. If you are owed more than the cheque amount, pursue the balance through a civil claim or MSME Samadhaan (if you are a registered micro or small supplier).
How FundRaksha helps
FundRaksha Legal drafts and sends lawyer-reviewed Section 138 notices within the legal timeline, keeps proof of delivery, and, if the drawer does not pay, takes the complaint forward through our legal partners. There is no upfront fee: we charge a 30% success fee only on the amount recovered, and court fees, if any, are borne by the client.
To reduce bounced cheques in the first place, move regular buyers to digital mandates with FundRaksha Collect, and check new buyers before extending credit on FundRaksha Trust.
This article is general information and not legal advice. Timelines are strict and facts matter; speak to a lawyer or our team about your specific case.