A dishonoured cheque gives the payee a choice of remedies: a civil suit to recover the money, a criminal complaint under Section 138 of the Negotiable Instruments Act, 1881, or both. The criminal route is widely used, in part because the statute presumes a debt in the payee's favour and a conviction can carry imprisonment. It is also unforgiving. A complaint filed a day early or a day late, or founded on a defective notice, can fail whatever its merits.
When Section 138 applies
The offence is made out where:
- a cheque drawn by a person on an account maintained by them is given in discharge, in whole or in part, of a legally enforceable debt or other liability;
- it is presented within six months of its date or within its period of validity, whichever is earlier (under Reserve Bank of India directions, cheques have been valid for three months since 2012);
- it is returned unpaid because the funds in the account are insufficient, or the amount exceeds the arrangement with the bank; and
- the payee follows the notice procedure described below and the drawer fails to pay.
Courts have held that dishonour for reasons such as “account closed” or “payment stopped by drawer” may also attract the section, subject to the drawer's defences. A cheque may be presented again within its validity, and a fresh dishonour followed by a fresh notice gives rise to a fresh cause of action.
The timeline, step by step
- Dishonour. The bank returns the cheque with a memo stating the reason. Note the date on which you received information of the dishonour from the bank; time runs from then.
- Demand notice: within 30 days. A written notice demanding payment of the cheque amount must be sent to the drawer within thirty days of receiving that information (Section 138, proviso (b)).
- Time to pay: 15 days. The drawer has fifteen days from receipt of the notice to pay (proviso (c)). If payment is made within that period, no offence arises.
- Cause of action. If the drawer does not pay within those fifteen days, the cause of action arises on their expiry.
- Complaint: within one month. The complaint must be filed within one month of the date on which the cause of action arises (Section 142(1)(b)). The court may take cognizance of a later complaint if the complainant shows sufficient cause for the delay, but that is a discretion, not a right.
A complaint filed before the fifteen-day period has run is premature. In Yogendra Pratap Singh v. Savitri Pandey (2014), a three-judge bench of the Supreme Court held that cognizance cannot be taken on such a complaint.
Getting the notice right
The notice is where many complaints falter.
- Demand the cheque amount. If you also claim interest or costs, state them separately. Notices demanding a different or composite figure have been held invalid in some cases.
- Send it to the correct address. A notice sent by registered or speed post to the drawer's correct address is ordinarily treated as served even if it is refused or returned unclaimed. Keep the postal receipts and the tracking record. Many payees also send the notice by email or other electronic means in addition.
- Address the right persons. Where the drawer is a company, send the notice to the company and, as a matter of caution, to the directors you intend to proceed against.
- Keep it factual. Identify the cheque, the bank, the date of and reason for dishonour, and the underlying transaction.
In C.C. Alavi Haji v. Palapetty Muhammed (2007), the Supreme Court held that a drawer who claims not to have received the notice may pay the amount within fifteen days of receiving the court's summons; a drawer who does not pay cannot later rely on non-receipt.
Where to file, and against whom
Since the 2015 amendment, a complaint concerning a cheque delivered for collection through an account is to be filed in the court within whose jurisdiction lies the branch of the bank where the payee maintains that account (Section 142(2)).
Where the drawer is a company, the company must itself be arraigned as an accused. Its directors and officers can be prosecuted under Section 141 only if the complaint specifically states that they were in charge of, and responsible to the company for, the conduct of its business at the relevant time. A bare statement that a person is a director is not enough.
Presumptions, interim compensation and appeals
Once the drawer admits the signature on the cheque, the law presumes that it was issued in discharge of a debt or liability (Sections 118 and 139). The presumption is rebuttable: the drawer may raise a probable defence, for instance by questioning the transaction or the complainant's means. Payees should therefore keep the documents that prove the underlying debt.
Section 143A allows the trial court to direct the drawer to pay interim compensation of up to twenty per cent of the cheque amount: in a summary or summons trial, once the drawer pleads not guilty, and in other cases once the charge is framed. It is payable within sixty days, which may be extended by thirty days for sufficient cause, and is to be repaid with interest if the drawer is acquitted. In Rakesh Ranjan Shrivastava v. State of Jharkhand (2024), the Supreme Court held that the power is discretionary: the court must take a prima facie view of the merits, and twenty per cent is a ceiling, not a default.
On conviction, the drawer may be punished with imprisonment for up to two years, a fine of up to twice the cheque amount, or both. If the drawer appeals, the appellate court may require a deposit of at least twenty per cent of the fine or compensation awarded (Section 148). The Supreme Court has indicated that such a deposit will ordinarily be directed, but that the appellate court may make an exception for reasons recorded.
Settlement
The offence is compoundable (Section 147), and many cases end in settlement. In Sanjabij Tari v. Kishore S. Borcar (September 2025), the Supreme Court revised its earlier guidance on the costs payable where a case is compounded late in the proceedings, reducing the percentages and indicating that no cost need be imposed where the case is compounded before the defence evidence. The same decision directed trial courts to permit service of summons by electronic means and to enable online payment, so that a drawer who wishes to pay can do so early. Courts retain a discretion on costs, and local practice should be checked.
A checklist for payees
- Keep the original cheque and the bank's return memo, and do not write on the cheque.
- Note the date on which you received information of the dishonour, and calendar the thirty-day, fifteen-day and one-month deadlines at once.
- Keep a copy of the notice, the postal receipts, the tracking record and any acknowledgement or reply.
- Preserve the evidence of the underlying debt: agreements, invoices, ledgers, bank transfers and correspondence.
- Consider whether a civil remedy, such as a summary suit under Order XXXVII of the Code of Civil Procedure, 1908, should run alongside the complaint.