Cheque Bounce Notice & Recovery Under NI Act 138
What you need to know
When a cheque is dishonoured due to insufficient funds or any other reason, Section 138 of the Negotiable Instruments Act, 1881 makes it a criminal offence. The payee (person who received the cheque) must first send a formal legal demand notice within 30 days of receiving the bank's dishonour memo. If the drawer (issuer) fails to pay within 15 days of receiving that notice, a criminal complaint can be filed in the Magistrate's court within 30 days of the expiry of the 15-day period. Conviction under Section 138 can result in imprisonment up to 2 years, a fine up to twice the cheque amount, or both.
Your rights
You have the right to demand full payment of the cheque amount plus interest after dishonour
You can file a criminal complaint making cheque dishonour a punishable offence (up to 2 years imprisonment)
You can simultaneously file a civil recovery suit for the cheque amount with interest and costs
The drawer cannot avoid liability by claiming the cheque was a 'security cheque' — courts recognise the presumption of debt under Section 139
What you should do now
Action firstCollect bank dishonour memo
- Obtain the official cheque return memo from your bank stating the reason for dishonour
- Note the date of dishonour — your 30-day notice window starts from this date
Send a formal Section 138 demand notice
- Draft and send a legal demand notice to the drawer within 30 days of dishonour, demanding payment within 15 days
- Send via Speed Post AND registered post AD to the drawer's last known address; keep all receipts and tracking proofs
- If you have a lawyer, have them sign the notice — it carries more weight and establishes the legal paper trail
Wait for the 15-day response period
- If the drawer pays within 15 days of receiving your notice, the matter is settled — obtain a written receipt
- If they do not pay or refuse, note the exact date of expiry of the 15-day period — you must file the complaint within 30 days of that date
File criminal complaint before Magistrate
- File a complaint under Section 138 NI Act before the Judicial Magistrate (First Class) in the city where the cheque was presented for payment
- Attach originals: dishonoured cheque, bank memo, copy of notice, postal receipts, and proof of non-payment
- Consider simultaneously filing a civil money recovery suit to recover the amount with interest and legal costs
Acts applicable
Negotiable Instruments Act, 1881
centralSection 138 — dishonour of cheque for insufficiency of funds
Negotiable Instruments Act, 1881
centralSection 139 — presumption in favour of holder
Negotiable Instruments Act, 1881
centralSection 142 — cognisance of offences