A bounced cheque given for a debt or liability is a criminal offence under Section 138 of the Negotiable Instruments Act - but only if you follow the timeline exactly. Miss a date and the case fails.
The timeline
- Present the cheque within its validity - 3 months from the date on it.
- Bank returns it with a memo ("funds insufficient", "exceeds arrangement", "account closed", "payment stopped by drawer" can all qualify).
- Send the demand notice within 30 days of receiving the bank's return memo.
- The drawer has 15 days from receiving the notice to pay.
- If they don't pay, file the complaint within one month after those 15 days end, before the magistrate with jurisdiction (where the payee's bank branch is).
What the notice must say
- Your details and the drawer's.
- The debt or liability for which the cheque was given.
- Cheque number, date, amount, bank.
- Date of presentation and of the return memo, with the reason.
- A clear demand for the cheque amount within 15 days of receipt.
- That you'll file a complaint under Section 138 if they don't pay.
Demand the cheque amount in the notice. Interest or other costs can be claimed separately, but mixing a vague total into the demand has caused notices to be challenged.
How to send
Speed Post or Registered Post AD to every known address, and keep the receipts and tracking. Courts have accepted notices by email and WhatsApp where they meet the IT Act requirements, so sending a copy that way too helps - but don't rely on it alone.
Penalty
Imprisonment up to 2 years, or a fine up to twice the cheque amount, or both. Courts can order interim compensation of up to 20% of the cheque amount.
Draft your Section 138 notice - it calculates your deadlines from the return memo date.