A bounced cheque is rarely just a banking inconvenience — under Indian law, it can be a criminal offence with real consequences for the person who issued it, and a genuine recovery route for the person who received it. Whether you’re the payee trying to recover money that’s rightfully yours, or the drawer who’s just received a legal notice, understanding the process under Section 138 of the Negotiable Instruments Act, 1881 is the first step to responding correctly.

This post walks through how cheque dishonour proceedings actually work, the timelines involved, and the options available to both sides.

What Qualifies as an Offence Under Section 138?

Not every bounced cheque leads to a criminal case. For Section 138 to apply, a few conditions need to be met:

  • The cheque must have been issued to discharge a legally enforceable debt or liability — not, for instance, as a gift or security without an underlying obligation.
  • The cheque must be dishonoured by the bank, most commonly due to insufficient funds or the account being closed.
  • The dishonour must be within the cheque’s validity period (currently three months from the date on the cheque).

If these conditions are met, the law provides a defined procedure for the payee to act — but it comes with strict timelines.

The Timeline: What the Payee Must Do

Section 138 proceedings move in three stages, each with its own deadline:

1. Issuance of a Demand Notice

Once the cheque is returned unpaid by the bank, the payee must send a written demand notice to the drawer within 30 days of receiving the bank’s dishonour memo. This notice should clearly state the amount due and call upon the drawer to pay within the statutory period.

2. The Drawer’s Window to Pay

The drawer then has 15 days from receipt of the notice to make the payment. If payment is made within this window, no criminal liability arises.

3. Filing the Complaint

If the drawer fails to pay within those 15 days, the payee can file a criminal complaint before the appropriate Magistrate’s court — this must be done within one month of the cause of action arising (i.e., after the 15-day period lapses).

Missing any of these deadlines can seriously weaken an otherwise valid claim, which is why prompt action matters as soon as a cheque is returned unpaid.

What Can Happen If the Case Proceeds?

Section 138 is a criminal provision, and a conviction can result in a fine (which may extend to twice the cheque amount), imprisonment of up to two years, or both. That said, the process is designed to encourage resolution — courts and parties frequently work toward settlement before matters reach trial.

If You’ve Received a Notice: What Are Your Options?

Receiving a legal notice under Section 138 can understandably cause concern, but it doesn’t automatically mean a conviction is inevitable.

  • Genuine defences do exist.
  • Paying within the 15-day window resolves the matter before it becomes a criminal complaint.
  • Settlement remains possible even after a complaint is filed.

The right response depends heavily on the specific facts, so it’s worth having the notice and underlying documents reviewed promptly.

If You’re Owed Money: What You Should Prepare

  • Original cheque
  • Bank dishonour memo
  • Agreement or invoice
  • Proof of debt
  • Record of dates

Acting within the statutory timelines is essential.

Frequently Asked Questions

Is a cheque bounce always a criminal offence?

Not automatically. It becomes an offence under Section 138 only where the cheque was issued for a legally enforceable debt and the statutory procedure is followed.

Can I recover the money without going to criminal court?

Yes. Depending on the facts, a civil recovery suit may also be available.

What if I’ve missed the 30-day notice deadline?

This is a strict statutory requirement. Seek legal advice immediately.

Can both parties settle after the case has been filed?

Yes. Cheque dishonour matters are compoundable and can be settled at various stages.

Get in Touch

If you’ve received a cheque dishonour notice, or a cheque you’ve received hasn’t been honoured, Chambers of Advocate Yash Yadav can review the specifics of your matter and advise on the appropriate next steps.

Call: +91 98994 48914

Chamber: Chamber No. 404 (L-4), Setalwad Chambers, Supreme Court Compound, Tilak Marg, New Delhi – 110001

This article is intended for general informational purposes only and does not constitute legal advice. Please consult an advocate regarding the specific facts of your matter.