What Happens When a Cheque Bounces? A Plain Guide to the Section 138 Complaint

A cheque given to repay a loan or pay a bill comes back from the bank marked "insufficient funds" or "payment stopped". The next question is nearly always the same: what can the person who received it actually do?

This article explains, for readers anywhere in India, how a cheque bounce complaint works under the Negotiable Instruments Act, 1881. It is a central law, so the basic steps are the same in every state. It is not one of the laws replaced in 2024, so the Bharatiya Nyaya Sanhita does not change these steps.

Why a bounced cheque can become a criminal case

Section 138 of the Act treats the return of a cheque unpaid, for lack of funds or because it exceeds the arrangement with the bank, as an offence by the person who drew it. The cheque must have been given to repay a legally enforceable debt or liability. The punishment can be imprisonment of up to two years, a fine of up to twice the cheque amount, or both. In practice, most cases end in settlement and payment, not jail.

The offence is not complete the moment the bank returns the cheque. The law first gives the drawer a chance to pay, and a complaint is valid only if a strict sequence of steps has been followed.

The steps and the time limits

Step	What happens	Time limit
1	Cheque is presented to the bank	Within its validity period (banks commonly treat a cheque as stale after three months from its date)
2	Payee sends a written demand notice to the drawer	Within 30 days of receiving the bank's information that the cheque was returned
3	Drawer gets a chance to pay the cheque amount	15 days from receiving the notice
4	If unpaid, payee files a written complaint before a Magistrate	Within one month after those 15 days end

First, the cheque must be presented to the bank within its validity period. Waiting too long can end the matter before it starts.

Under Section 142, only the payee or holder of the cheque can file, and only a Metropolitan Magistrate or a Judicial Magistrate of the first class can try the case. A court may accept a late complaint if the payee shows sufficient reason for the delay, but a formal application is needed.

The periods are added, not merged. In Rama Oberoi v. State (Delhi High Court, reported September 2025, Justice Girish Kathpalia), a drawer argued that the complaint was filed before a "45-day" period had run. The court rejected this: the 15 days to pay and the 30 days to file are separate periods, and the one-month filing limit runs from the end of the 15 days.

Since 2015, the complaint is generally filed in the court where the payee's bank branch is located if the cheque was deposited through the payee's own account.

Two recent Supreme Court rulings

Cash loans above Rs 20,000

In Sanjabij Tari v. Kishore S. Borcar (2025 INSC 1158; reported 25-26 September 2025), a bench of Justice Manmohan and Justice N.V. Anjaria held that a loan given in cash above Rs 20,000 does not become unenforceable under Section 138 only because it breaks the cash-loan limit in Section 269SS of the Income Tax Act. That breach attracts a tax penalty; it does not wipe out the debt.

The Court also issued directions to speed up these cases, including that summons should tell the accused that the cheque amount can be paid at the very start through an online link. It also revised the costs payable for settling (compounding) a case: none if settled before the accused leads defence evidence, with an extra 5 per cent of the cheque amount if settled later at the trial court, and higher percentages in appeal or revision.

Cheques issued by a company

In Manjula Kapoor v. State of Himachal Pradesh (2026 INSC 789), reported on 4-5 August 2026, Justices Manoj Misra and Vijay Bishnoi dealt with a Rs 5 lakh cheque issued by a company. The complaint named only the director who signed it, not the company. Relying on the Supreme Court's earlier decision in Aneeta Hada v. Godfather Travels & Tours (2012), the Court held that failing to make the company an accused is a fatal defect, quashed the complaint, and held that the High Court had gone beyond its powers in directing the trial court to add the company afterwards.

The lesson for anyone drafting or defending such a complaint is that the account holder named on the cheque matters.

A short worked example

Suppose Meera lends Rs 2 lakh to Anil and he gives a cheque dated 1 October. Meera deposits it on 5 October and it is returned unpaid on 9 October. She receives the bank's return memo that day. She sends a written notice on 20 October, within 30 days, and Anil receives it on 22 October. Anil then has until 6 November to pay. If he does not, Meera has one month after that window closes to file her complaint. If she files on 15 November, she is within time. If she waits until January, she would need to explain the delay to the court.

This example is illustrative only and uses no real person.

What to keep in mind

The cheque bounce route works only if every step is done in order and on time, so the dates on the cheque, the bank's return memo, the notice and its delivery receipt all matter. A settlement at any stage is possible, and the court can allow it. A debt that has genuinely been repaid, or a cheque that was not given for a legally enforceable liability, can be raised as a defence. Where a company is involved, the company itself must be an accused. The exact steps and costs can vary with the facts and with court practice in your district.

Short summary in Hinglish

Cheque bounce hone par seedha case nahi banta: pehle 30 din ke andar written notice bhejna padta hai. Notice milne ke baad 15 din payment ke liye milte hain, uske baad ek mahine ke andar complaint file ho sakti hai. Company ka cheque ho to complaint mein company ko accused banana zaroori hai, yeh Supreme Court ne August 2026 mein dobara saaf kiya.

Sources

This article is for general information and is not legal advice. Please consult a qualified advocate for your specific situation.

Kanoonwale Bhaiya | Legal Awareness by Advocate Prabal Bhandari

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