Cheque Bounce Case in India: Section 138 NI Act — Complete Legal Guide

By Advocate Ganta Surya Kiran | 19 Law Chambers, Visakhapatnam | Banking & Finance Law

A cheque bounce is one of the most common legal disputes in India. Whether you are a business owner, a landlord, or an individual — receiving a bounced cheque can be financially damaging and frustrating. The good news is that Indian law provides a strong and fast legal remedy under Section 138 of the Negotiable Instruments Act, 1881.

This guide explains exactly what a cheque bounce case is, what the law says, what steps you must take, and what punishment the offender faces.

Quick Answer: Is cheque bounce a criminal offence in India? Yes. Under Section 138 of the Negotiable Instruments Act, 1881, cheque bounce is a criminal offence punishable with imprisonment up to 2 years, or fine up to twice the cheque amount, or both. It is one of the few financial disputes where the defaulter can go to jail.

1. What is a Cheque Bounce?

A cheque is said to have “bounced” or been “dishonoured” when the bank returns it unpaid. This happens due to:

• Insufficient funds in the account
• Signature mismatch
• Account closed or frozen
• Amount in words and figures differ
• Post-dated cheque presented too early
• Overwriting or corrections on the cheque

Important: Not all reasons for dishonour attract criminal liability under Section 138. The law specifically covers dishonour due to insufficient funds or exceeding the arranged credit limit. Technical reasons like signature mismatch may require a civil remedy instead.

2. Section 138 of the Negotiable Instruments Act, 1881

Section 138 makes it a criminal offence when:

• A cheque drawn on a bank account is returned unpaid
• The reason is insufficient funds or amount exceeds the arrangement
• The cheque was issued for discharge of a legally enforceable debt or liability

Punishment under Section 138:

• Imprisonment up to 2 years, OR
• Fine up to twice the cheque amount, OR
• Both imprisonment and fine

Key point: The burden of proof is on the accused (drawer) to prove the cheque was not issued for a debt. This makes Section 138 cases highly favourable for the complainant (payee).

3. Step-by-Step Cheque Bounce Case Procedure

Step 1 — Receive the Cheque Return Memo

When your bank returns the cheque, it issues a Cheque Return Memo stating the reason for dishonour. Preserve this document — it is your primary evidence.

Step 2 — Send a Legal Notice Within 30 Days

This is the most critical step. You must send a written legal notice to the cheque drawer (the person who gave you the cheque) within 30 days of receiving the cheque return memo.

The notice must:

• Demand payment of the cheque amount
• Give the drawer 15 days to make the payment
• Be sent by Registered Post with Acknowledgement Due (RPAD)

Do not skip this step. Without a valid legal notice sent within 30 days, your case will be dismissed.

Step 3 — Wait for 15 Days

Give the drawer 15 days to respond and make payment. If they pay within this period, the matter is settled. If they do not pay or do not respond, you can proceed to file a complaint.

Step 4 — File Complaint in Magistrate Court Within 30 Days

If the drawer fails to pay within the 15-day notice period, you must file a criminal complaint before the Judicial Magistrate First Class (JMFC) or Metropolitan Magistrate within 30 days of the expiry of the notice period.

Jurisdiction: The complaint can be filed where:

• The cheque was presented to the bank, OR
• Where the cheque was drawn (issued), OR
• Where the legal notice was delivered

Step 5 — Court Process

• Court issues summons to the accused
• Accused appears and case is heard
• Evidence is presented — cheque, return memo, legal notice, postal receipts
• If found guilty — punishment under Section 138 is imposed

4. Time Limits — Critical Deadlines

Missing any deadline can result in your case being dismissed. Contact Advocate Ganta Surya Kiran immediately if you have received a bounced cheque — time is critical.

5. What If You Receive a Legal Notice for Cheque Bounce?

If you are the drawer and have received a legal notice for cheque bounce, here is what you should do:

• Do not ignore the notice — ignoring it leads to automatic criminal case filing
• Pay the cheque amount within 15 days to avoid criminal proceedings
• If you dispute the debt — consult an advocate immediately
• Defences available: the cheque was a gift and not for a debt; the cheque was stolen; the signature was forged; the cheque was given as security and conditions were not met

6. Both Civil and Criminal Remedies Available

Many people do not know that for a cheque bounce you can pursue both criminal and civil remedies simultaneously:

• Criminal case under Section 138 NI Act — for punishment and deterrence
• Civil suit for recovery of the cheque amount with interest — filed in Civil Court
• Summary suit under Order 37 CPC — faster civil remedy for recovery of money

7. Frequently Asked Questions

Q: Can a cheque bounce case be settled out of court? Yes. Compounding (settlement) is allowed under Section 147 of the NI Act. If the drawer pays the full amount plus any agreed compensation, the complainant can withdraw the case at any stage — even after conviction.

Q: What if the cheque was given as security and not for a debt? This is a valid defence. If the cheque was given as a security deposit and not to discharge a debt or liability, Section 138 may not apply. You need an experienced advocate to argue this defence effectively.

Q: How long does a cheque bounce case take in India? Courts try to fast-track Section 138 cases under Chapter XVII of the NI Act. On average, cases take 1 to 3 years depending on the court’s workload and cooperation of the accused.

Q: Can a company file a cheque bounce case? Yes. Companies, partnerships, and any legal entity can both file and face cheque bounce complaints. Directors of a company can be personally prosecuted under Section 141 NI Act if the company issues a bounced cheque.

Q: What is the court fee for filing a cheque bounce complaint? Court fees are nominal — typically ₹200 to ₹500. However, advocate fees vary depending on the complexity and the court.

Need Help with a Cheque Bounce Case in Visakhapatnam?

Advocate Ganta Surya Kiran at 19 Law Chambers has extensive experience handling cheque bounce cases across Visakhapatnam and Andhra Pradesh — both for complainants and accused parties.

📍 30-6-12, First Floor, Opp. Prema Samajam, Daba Gardens, Visakhapatnam, Andhra Pradesh 530020 📞 +91 99495 92127 🌐 19lawchambers.com 📺 YouTube: @19LawChambers | Instagram: @19lawchambers

Time is critical in cheque bounce cases. Contact us immediately after receiving a bounced cheque.

Disclaimer: This article is for general legal education and awareness purposes only. It does not constitute legal advice. Please consult a qualified advocate for advice specific to your situation.