What to do When Your cheque bounced? Understanding the Stages of a Section 138 NI Act Complaint
A Practical Guide for Cheque Dishonour Cases
By Advocate Avichal Pandey, Allahabad High Court, Prayagraj
In commercial and financial transactions, cheques remain one of the most trusted modes of payment. However, when a cheque issued towards discharge of liability is dishonoured by the bank, the law provides a strong legal remedy to the payee under Section 138 of the Negotiable Instruments Act, 1881.
Cheque bounce litigation has become one of the most frequently filed criminal complaints in Indian courts. While many individuals are aware that dishonour of cheque is punishable, very few understand the complete legal procedure involved in filing and prosecuting a complaint under Section 138 NI Act.
This article explains the complete stages of a Section 138 complaint in simple terms.
What is Section 138 of the Negotiable Instruments Act?
Section 138 deals with dishonour of cheques for insufficiency of funds or when the amount exceeds the arrangement made with the bank.
A person can be prosecuted if:-
●A cheque is issued for discharge of legally enforceable debt or liability
●The cheque is returned unpaid by the bank
●The drawer fails to make payment despite receiving legal notice
●
The offence is criminal in nature and can lead to fine, compensation, and imprisonment.
Stage 1: Dishonour of Cheque
The process begins when the cheque presented by the payee is returned unpaid by the bank.
Common reasons include:-
●Insufficient funds
●Account closed
●Payment stopped by drawer
●Exceeds arrangement
●Signature mismatch (subject to facts)
The bank issues a Cheque Return Memo specifying the reason for dishonour.
This memo is a crucial document for initiating legal proceedings.
Stage 2: Sending Legal Notice
Once the cheque is dishonoured, the payee must send a legal demand notice to the drawer.
Time Limit:-
The notice must be issued within 30 days from the date of receiving information regarding dishonour from the bank.
The notice should clearly mention:-
●Details of cheque
●Date of dishonour
●Amount involved
●Demand for payment within statutory period
●Service of notice is a mandatory legal requirement.
Stage 3: Waiting Period of 15 Days
After receipt of legal notice, the drawer is granted 15 days to make payment.
This period provides an opportunity to settle the matter without litigation.
Two possibilities arise:-
●If payment is made:
●The dispute ends.
If payment is not made:-
"Cause of action arises on the 16th day, enabling the complainant to file a criminal complaint."
Stage 4: Filing of Complaint
Once cause of action arises, the complainant must file the complaint before the competent Magistrate.
Limitation:-
●The complaint must be filed within one month from the date when cause of action arises.
●Delay may be condoned by the court if sufficient reasons are shown.
The complaint generally includes:-
●Complaint petition
●Original cheque
●Return memo
●Copy of legal notice
●Postal receipts / tracking proof
●Affidavit of evidence
Court Proceedings After Filing
Once the complaint is filed, the judicial process begins.
Stage 5: Verification by Magistrate
The Magistrate examines the complaint and accompanying documents to ensure compliance with legal requirements.
The court verifies:-
●Whether limitation is complied with
●Whether notice was properly served
●Whether prima facie offence is made out
If satisfied, the court proceeds further.
Stage 6: Cognizance and Issuance of Summons
●The Magistrate takes cognizance under criminal procedural law and issues summons to the accused.
●This is the formal beginning of trial proceedings.
●The accused is required to appear before the court on the specified date.
Failure to appear may lead to:-
●Bailable warrants
●Non-bailable warrants in appropriate cases
Stage 7: Appearance of Accused
Upon receiving summons, the accused appears before the court.
At this stage:-
●Bail is generally granted
●Notice of accusation is explained
●Plea of accused is recorded
The accused may either:
●Admit liability and seek settlement
●Contest the complaint
Stage 8: Evidence of Complainant
The complainant submits evidence, usually through affidavit.
Documents are exhibited before the court, including:-
●Dishonoured cheque
●Return memo
●Legal notice
●Postal records
The complainant may also seek interim compensation under Section 143A NI Act, which can extend up to 20% of cheque amount.
Stage 9: Cross-Examination
The accused gets the opportunity to cross-examine the complainant and challenge:-
●Existence of legally enforceable debt
●Validity of notice
●Authenticity of transaction
●Procedural compliance
●Cross-examination often determines the outcome of the case.
Stage 10: Statement of Accused
The court records the statement of accused to explain incriminating circumstances appearing in evidence.
The accused may present:-
●Defence documents
●Witnesses
●Explanation regarding issuance of cheque
Common defences include:
●Security cheque
●No legal liability
●Material alteration
●Misuse of cheque
Stage 11: Final Arguments
●Both parties present legal submissions before the court.
The complainant argues:-
●Presumption under Sections 118 and 139 NI Act
●Compliance with statutory requirements
●The accused attempts to rebut these presumptions.
Stage 12: Judgment
After hearing both sides, the court pronounces judgment.
If convicted:-
The court may impose:-
●Compensation up to twice the cheque amount
●Fine
●Imprisonment up to two years
If acquitted:-
The accused is discharged from criminal liability.
Can a Section 138 Case Be Settled?
Yes.
Cheque dishonour cases are compoundable offences.
Settlement can happen at any stage through:-
●Mutual compromise
●Mediation
●Payment with agreed terms
●Courts encourage settlement to reduce prolonged litigation.
Important Practical Advice
For complainants:-
●Preserve all original documents
●Send legal notice promptly
●File complaint within limitation
For accused persons:-
●Respond to notice immediately
●Explore settlement options
●Seek legal representation at earliest stage
Conclusion
Section 138 NI Act is an effective legal mechanism to maintain trust in financial transactions. However, strict adherence to procedural timelines is essential.
Whether you are a complainant seeking recovery or an accused defending a cheque dishonour complaint, proper legal strategy can significantly impact the outcome of the case.
Timely legal advice often prevents unnecessary litigation and facilitates faster resolution.
Advocate Avichal Pandey
Practicing Advocate, Allahabad High Court, Prayagraj
Specializing in:
●Criminal Litigation
●Cheque Bounce Matters
●Bail & Anticipatory Bail
●Criminal Revisions
●Quashing Petitions
●Legal Advisory Services
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