Civil & Property Law
Property Mutation in Uttar Pradesh: How to Apply for Dakhil-Kharij
How to apply for property mutation (dakhil-kharij) in UP — Tehsil or municipal body, documents required, and what mutation does and does not prove.
Cheque Bounce under Section 138 NI Act: Procedure and Time Limits
Under Section 138 of the Negotiable Instruments Act, 1881, a cheque-bounce complaint requires three steps: present the cheque within its validity period, send a written demand notice within 30 days of dishonour, and file in court within one month of the 15-day reply period expiring unpaid. The trial is before a Judicial Magistrate.
What does Section 138 cover?
Section 138 of the Negotiable Instruments Act, 1881 makes it a criminal offence to issue a cheque that is returned unpaid by the bank — whether for insufficient funds, for the amount exceeding the arrangement, or for the account being closed.
Three conditions must all be met before the offence arises:
- The cheque must have been issued to discharge a debt or liability owed by the drawer to the payee. A cheque given as a gift does not attract Section 138. Under Section 139, the court presumes the cheque was issued for a debt unless the drawer proves otherwise.
- The cheque must have been presented to the bank within its validity period (three months from the date on the cheque).
- It must have been returned unpaid by the bank.
Even after these three conditions are met, the offence under Section 138 does not immediately crystallise. It crystallises only after the notice-and-reply sequence described below fails.
What are the three mandatory steps before filing?
The scheme of Section 138 is unusual: it builds in a last opportunity to pay before a criminal case is possible. The steps are sequential and each has a strict deadline.
| Step | What happens | Deadline |
|---|---|---|
| 1. Dishonour | Bank returns cheque and issues a return memo | — |
| 2. Demand notice | Payee sends written notice to drawer demanding payment | Within 30 days of receiving the bank’s dishonour memo |
| 3. Failure to pay | Drawer does not pay within the notice period | Drawer has 15 days from receipt of notice |
| 4. File complaint | Payee files complaint in court | Within 1 month of the cause of action arising (i.e., the day after the 15-day period expires) |
Miss any of these deadlines and the case cannot proceed. The 30-day window for the notice is particularly critical: courts have consistently refused to take cognizance where the notice was sent late.
The notice should be sent by registered post with acknowledgement due (AD). If the drawer refuses to accept it or the envelope is returned undelivered, the date of refusal or return is treated as the date of service. Keep the returned envelope and the postal receipt — they become exhibits.
Which court hears the case, and where?
Section 138 cases are tried by a Judicial Magistrate of the First Class (JMFC). The Bareilly district court complex includes JMFC courts that try these cases.
Jurisdiction is governed by Section 142(2), inserted by the Negotiable Instruments (Amendment) Act, 2015. Where the cheque is deposited through a bank account, the court with jurisdiction is the one at the location of the payee’s bank branch — that is, where the payee deposited the cheque, not where the drawer’s account is held. Where the cheque was presented directly over the counter at the drawee bank, jurisdiction lies at that bank’s branch location.
This 2015 amendment reversed an earlier Supreme Court ruling in Dashrath Rupsingh Rathod v. State of Maharashtra (2014) that had placed jurisdiction only with the drawee bank’s location.
What documents are needed to file?
| Document | Purpose |
|---|---|
| Original dishonoured cheque | Primary exhibit; must be the original, not a photocopy |
| Bank return memo | Proves dishonour and fixes the 30-day deadline |
| Demand notice | The written notice sent to the drawer |
| Proof of service | Registered post receipt, AD card, or the returned envelope |
| Bank statement showing presentation | Corroborates the timeline |
| Agreement, invoice or other debt document | Supports the debt or liability underlying the cheque |
The original cheque is essential. If it has been lost, the case becomes significantly more difficult — speak to an advocate before proceeding.
What happens at court?
The complaint is a private complaint, not a police matter. The process:
- Filing and examination on oath — the complainant (payee) swears to the complaint before the Magistrate. The court examines the complainant on oath under Section 200 CrPC (now Section 223 BNSS).
- Cognizance and summons — if the court is satisfied that the statutory requirements are met, it takes cognizance of the offence and issues summons to the drawer.
- Plea — the accused appears and enters a plea.
- Trial — evidence is led. The burden starts with the complainant to prove the dishonour and the notice; once established, the drawer must rebut the Section 139 presumption that the cheque was for a debt.
- Judgment — conviction or acquittal.
Under Section 143 NI Act, these trials are conducted as summary trials to the extent possible, to reduce delay. Even so, contested matters take time, and the possibility of settlement under Section 147 often provides a quicker resolution.
Can the case be compounded (settled)?
Yes, and this is common. Section 147 makes the Section 138 offence compoundable — the parties may settle at any stage of the proceedings, including at appeal stage. Courts have held that even a Supreme Court appeal can be withdrawn on settlement.
The settlement is usually the full cheque amount plus any costs the complainant has incurred. Once the court records the settlement and the complainant confirms it, the case is closed.
A note on the scope of this offence
Section 141 NI Act extends liability to companies and partnerships: where the offence is committed by a company, every person who was in charge of, and responsible for, the conduct of the business of the company is also liable. Directors, partners and senior management have been prosecuted under this provision.
Where multiple cheques were issued under the same transaction and each was dishonoured, each cheque gives rise to a separate cause of action and a separate complaint is required for each.
Related
Frequently asked questions
What is the time limit to send the demand notice after a cheque bounces?
The payee must send a written demand notice within 30 days of receiving information from the bank that the cheque was dishonoured. If this deadline is missed, the court cannot take cognizance of the offence and the case cannot proceed.
How long does the drawer have to pay after receiving the notice?
Fifteen days from the date of receiving the demand notice. If the drawer pays the full amount within this period, the offence under Section 138 is not made out. After the 15-day period expires without payment, the cause of action to file a complaint arises.
What is the deadline to file the complaint in court?
One month from the date the cause of action arose, which is the day immediately after the 15-day notice period expires without payment. Courts do have the power to condone delay in exceptional circumstances, but it is far safer to file within time.
Can the case be settled after it is filed?
Yes. Section 147 of the Negotiable Instruments Act makes the offence under Section 138 compoundable, meaning the parties may settle at any stage — including after filing and even during appeal. The court may record the settlement and close the case. Payment of the full cheque amount is the usual basis of settlement.
What is the punishment if the drawer is convicted?
Imprisonment of up to two years, a fine of up to twice the amount of the cheque, or both. In practice, courts commonly direct restitution of the cheque amount plus costs as part of the sentence. The offence is not cognizable, meaning the police cannot arrest without a warrant.
Does the cheque have to be for a debt? Can it be a security cheque?
Section 138 applies only where the cheque was drawn for the discharge of a debt or liability. Section 139 creates a presumption that it was so drawn unless the contrary is proved. A cheque issued as security is also covered, and the drawer must rebut the presumption affirmatively.