Civil, Consumer & Recovery
Cheque Bounce (Section 138, NI Act)
Demand notice, complaint and trial when a cheque given for a debt is dishonoured.
DLP's chamber: No. 548, A Block, High Court, Lucknow
What the law says
Under Section 138 of the Negotiable Instruments Act, 1881, it is an offence if a cheque issued to discharge a legally enforceable debt is returned unpaid for insufficient funds or because it exceeds the arranged amount, and the drawer does not pay after notice. The payee or holder in due course must send a written demand notice to the drawer within 30 days of receiving the bank's return memo; the drawer then has 15 days from receipt of the notice to pay. If payment is not made, the complaint is filed before the Magistrate within one month of the expiry of those 15 days. The offence is punishable with imprisonment of up to two years, or a fine of up to twice the cheque amount, or both. The offence can be compounded.
Consultation
Speak to the chamber.
Leave your name, number and a line about the matter. A member of the chamber will call or message you back during working hours.
Frequently Asked Questions
Who sends the legal notice?
The payee or holder in due course of the cheque, usually through an advocate, sends a written demand notice to the drawer. The bank only returns the cheque with a memo giving the reason.
What are the time limits?
Present the cheque within its validity; send the notice within 30 days of the return memo; the drawer has 15 days from receiving the notice to pay; and the complaint must be filed within one month after those 15 days end. The court can condone delay in filing the complaint for sufficient cause.
What is the penalty?
Imprisonment for up to two years, or a fine of up to twice the amount of the cheque, or both. The court can also order interim compensation during the case under Section 143A.
I received a notice. What should I do?
Note the date you received it, because the 15 days run from then. Take advice promptly: depending on the facts you may pay, reply disputing the debt, or prepare a defence. The case can also be settled and compounded.
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