Cheque Bounce Case Under Section 138 NI Act
What you need to know
When a cheque is returned by the bank with the endorsement 'Refer to Drawer', it constitutes a dishonour under Section 138 of the Negotiable Instruments Act, 1881. This means the drawer (issuer) has insufficient funds or the account has issues, and the payee (you) has a legal right to initiate criminal proceedings against the drawer. Indian courts treat this as a criminal offence punishable with imprisonment up to two years and/or a fine up to twice the cheque amount. To successfully prosecute, you must follow a strict procedural timeline: send a legal demand notice within 30 days of dishonour, wait 15 days for payment, and file a complaint within 30 days of the notice period expiry.
Your rights
Right to send a legal demand notice to the drawer within 30 days of receiving the dishonour memo
Right to file a criminal complaint under Section 138 NI Act if drawer fails to pay within 15 days of notice
Right to claim the cheque amount plus interest and legal costs as compensation
Right to file a civil recovery suit simultaneously alongside the Section 138 criminal complaint
What you should do now
Action firstCollect and preserve dishonour documents
- Obtain the original cheque returned by the bank along with the bank's dishonour memo clearly stating 'Refer to Drawer'
- Note the exact date of dishonour — this starts your 30-day clock for sending the demand notice
- Keep the original cheque deposit slip and bank statement showing the presentation
Send a legal demand notice within 30 days of dishonour
- Draft a formal demand notice (see draft below) through a lawyer or yourself, demanding payment of the cheque amount within 15 days
- Send via Registered Post AD (acknowledgement due) AND email to the drawer's last known address — keep all postal receipts
- If drawer refuses delivery or is absent, the notice is still deemed served under law
File complaint if drawer does not pay within 15 days
- If the drawer fails to pay within 15 days of receiving the notice, file a criminal complaint under Section 138 before the jurisdictional Magistrate within 30 days of the expiry of the 15-day period
- Attach: original cheque, dishonour memo, copy of demand notice, postal receipt/AD card, your affidavit as complainant
- Consider filing a civil suit simultaneously for cheque amount + interest for faster monetary recovery
Attend court and follow up
- Appear before the Magistrate when summoned; the court will record your complaint on oath (Section 200 CrPC)
- If convicted, drawer faces imprisonment up to 2 years and/or fine up to twice the cheque amount — courts often award compensation directly to you
Acts applicable
Negotiable Instruments Act, 1881
centralSection 138 — dishonour of cheque for insufficiency of funds
Negotiable Instruments Act, 1881
centralSection 142 — cognizance of offences, limitation period for complaint
Code of Criminal Procedure, 1973
centralSection 200 — complaint filed before magistrate on oath