Know Your Legal Options Under Section 138 NI Act
30-day notice | 15-day payment period | Complaint limitation
Whether you have issued a cheque that has been dishonoured or received a Section 138 notice, the relevant dates, documents and underlying transaction should be examined carefully.
A cheque dishonour can trigger statutory consequences when the requirements of Section 138 are satisfied. The first step is to identify the relevant dates and preserve the bank and transaction records.
The 3 things to check first
01 — Bank return information
Preserve the cheque and bank return memo.
02 — 30-day notice period
Check whether the statutory demand notice has been or must be issued within the applicable period.
03 — 15-day payment period
If a statutory notice has been received, calculate the 15-day period carefully.
What to do after a cheque dishonour, the 30-day notice period, 15-day payment period and complaint limitation explained
A cheque bounce can create serious financial and legal consequences for both individuals and businesses. Section 138 of the Negotiable Instruments Act, 1881 provides a statutory remedy in specified circumstances where a cheque issued towards a legally enforceable debt or other liability is returned unpaid.
However, the statutory timelines are important. A cheque dishonour does not automatically result in a Section 138 offence; the requirements prescribed by the law must be satisfied.
If your cheque has been dishonoured, the first priority is to identify the date of dishonour, preserve the bank records and determine which statutory step applies to your situation.
Cheque Bounced? Start With These 3 Steps
1. Preserve the Bank Return Memo and Cheque Records
Obtain and preserve the bank’s return memo or other information showing that the cheque was returned unpaid.
Keep copies of:
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- The original cheque
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- Bank return memo
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- Bank statement or transaction record
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- Invoice, loan agreement or other documents relating to the underlying transaction
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- Communications between the parties
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- Any previous payment records
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- Details of the cheque presentation
These documents can become important when determining whether the requirements of Section 138 are satisfied.
2. Check the 30-Day Statutory Notice Period
Where Section 138 applies, the payee or holder in due course must make a written demand for payment within 30 days of receiving information from the bank regarding the return of the cheque unpaid.
The notice should demand payment of the cheque amount and should comply with the statutory requirements.
The 30-day period under Section 138(b) is therefore an important deadline.
Do not calculate the deadline casually. The relevant dates and manner of receipt of information should be examined from the bank records and documents in the particular case.
Section 138 specifically provides for the 30-day period for issuing the demand notice.
3. Track the 15-Day Payment Period and Subsequent Limitation
After receipt of the statutory notice, the drawer gets 15 days to make payment of the cheque amount under Section 138(c).
If payment is not made within that period, the statutory cause of action may arise, subject to satisfaction of the other requirements of Section 138.
A complaint under Section 138 is then subject to the limitation requirements prescribed under Section 142 of the Negotiable Instruments Act.
The dates should therefore be calculated carefully rather than assuming that a complaint can be filed immediately after the 15th day.
Are You the Person Who Issued the Cheque — or the Person Who Received It?
If you received a bounced cheque:
You need to examine the bank return information, statutory notice period, underlying liability and subsequent complaint limitation.
If you issued the cheque and received a Section 138 notice:
You should examine the notice, underlying transaction, alleged liability, cheque issuance, payments already made and applicable legal defences.
Cheque Dishonoured
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30 days — Statutory demand notice
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15 days from receipt of notice — Payment period
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Cause of action
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1 month — Ordinary complaint limitation under Section 142(1)(b)
Section 138 Cheque Bounce Timeline
| Stage | What happens |
|---|---|
| Cheque presented | The cheque is presented to the bank within its applicable validity period. |
| Cheque dishonoured | The bank returns the cheque unpaid and provides information/return documentation. |
| Within 30 days | Written statutory demand notice is issued, where Section 138 applies. |
| 15 days after receipt of notice | Drawer has the statutory opportunity to make payment. |
| After failure to pay | Cause of action arises subject to the statutory requirements. |
| Complaint | If the drawer does not make payment within 15 days of receiving the statutory notice, the cause of action arises subject to the requirements of Section 138. Under Section 142(1)(b), the complaint is ordinarily required to be made within one month from the date on which the cause of action arises, subject to the court’s power to condone delay where sufficient cause is shown. |
Section 138 provides the 30-day notice requirement and 15-day payment period.
What Is Section 138 of the Negotiable Instruments Act?
Section 138 deals with dishonour of a cheque in specified circumstances, including where a cheque issued for payment of an amount towards a legally enforceable debt or other liability is returned unpaid for the reasons covered by the provision.
The section provides for criminal liability subject to its statutory conditions.
The punishment prescribed under Section 138 may extend to imprisonment up to two years, or fine up to twice the amount of the cheque, or both, subject to the law and facts applicable to the particular case.
Importantly, every bounced cheque does not automatically result in conviction under Section 138.
The statutory ingredients and surrounding facts have to be examined.
When Can a Cheque Bounce Become a Section 138 Case?
Broadly, the following statutory requirements are relevant; the precise application depends on the facts and the statutory provisions applicable to the particular case:
1. There must be a cheque covered by Section 138
The cheque must have been drawn for payment of money towards a legally enforceable debt or other liability.
2. The cheque must be returned unpaid for a reason covered by Section 138
The statutory provision specifically addresses dishonour in the circumstances described in the section.
3. The cheque must be presented within the applicable period
Section 138 contains a requirement concerning presentation of the cheque within the period prescribed by law.
4. A written demand notice must be issued within 30 days
The payee/holder in due course must make the statutory demand within the prescribed 30-day period after receiving information from the bank regarding dishonour.
5. Payment is not made within 15 days of receipt of notice
The drawer has the statutory 15-day period mentioned in Section 138(c).
6. The complaint must satisfy Section 142
The complaint must comply with the statutory requirements relating to cognizance, jurisdiction and limitation.
What Should You Do Immediately After a Cheque Bounces?
If you are the payee/holder, consider taking these practical steps:
Preserve the original documents
Keep the cheque, return memo, bank records and transaction documents safely.
Record the important dates
Write down:
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- Date of cheque
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- Date of presentation
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- Date of dishonour
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- Date you received information from the bank
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- Date of statutory notice
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- Date the notice was received
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- Date on which the 15-day period expires
Examine the underlying transaction
The existence and nature of the underlying liability can be important.
Collect:
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- Agreements
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- Invoices
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- Loan documents
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- Account statements
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- Delivery records
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- Emails
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- WhatsApp communications
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- Payment acknowledgements
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- Previous correspondence
Do not wait until the last day
If a statutory deadline is approaching, obtain case-specific legal advice promptly rather than waiting for the deadline to expire.
What If You Have Received a Cheque Bounce Notice?
Need Case-Specific Legal Advice?
If you are dealing with a Section 138 notice, cheque dishonour dispute or security-cheque issue, the relevant documents and statutory dates should be examined before deciding the next legal step.
Received a Section 138 Notice?
If you are the person who issued the cheque and have received a cheque bounce notice or are facing a Section 138 complaint, see our dedicated guide on cheque bounce defence, including disputed debt, security cheques, payment disputes and other defence issues.
Advocate Ajay Malik, Delhi
+91-8766252309
Receiving a Section 138 notice does not mean that conviction has already occurred.
The notice should be examined carefully along with:
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- The cheque
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- The underlying transaction
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- Bank records
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- The alleged liability
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- The date of dishonour
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- The date and contents of the notice
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- Proof of service
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- Previous payments or settlements
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- Any dispute regarding the transaction
Depending on the facts, the appropriate legal response may involve payment, settlement, a reasoned reply, or contesting the allegations through appropriate legal proceedings.
Do not ignore a statutory notice merely because you believe the cheque was issued as security or that the amount is disputed. The facts and documents should be examined carefully.
What If the Cheque Was Given as a Security Cheque?
A cheque described as a “security cheque” does not by itself answer the Section 138 question.
The important issue may include whether there was a legally enforceable debt or liability when the cheque was presented and whether the statutory requirements were satisfied.
The Supreme Court has considered the treatment of security cheques in several decisions, and the answer depends on the facts and nature of the underlying liability.
Therefore, simply stating:
“It was only a security cheque”
may not, by itself, resolve the matter.
The underlying agreement, liability, payments, date of presentation and surrounding circumstances should be examined.
→ Read our detailed Security Cheque Bounce GuideA cheque described as a “security cheque” does not by itself answer the Section 138 question.
The important issue may include whether there was a legally enforceable debt or liability when the cheque was presented and whether the statutory requirements were satisfied.
The Supreme Court has considered the treatment of security cheques in several decisions, and the answer depends on the facts and nature of the underlying liability.
Therefore, simply stating that:
“It was only a security cheque”
may not, by itself, resolve the matter.
The underlying agreement, liability, payments, date of presentation and surrounding circumstances should be examined.
What Documents Should You Keep in a Cheque Bounce Case?
If you are considering action under Section 138, keep the following documents:
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- Original cheque
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- Bank return memo
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- Bank statement
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- Statutory legal notice
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- Postal/courier receipt
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- Tracking report
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- Proof of delivery or other service records
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- Loan agreement, invoice or contract
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- Account statement
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- Payment records
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- Emails and WhatsApp communications
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- Relevant correspondence
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- Any settlement documents
The exact documents required will depend upon the nature of the transaction and the facts of the case.
Common Mistakes in Cheque Bounce Cases
Mistake 1: Ignoring the 30-day notice period
The statutory notice requirement under Section 138(b) has a specific timeline.
Mistake 2: Assuming that every cheque bounce automatically becomes a criminal case
Section 138 contains specific statutory conditions. A dishonoured cheque by itself does not establish every ingredient of the offence.
Mistake 3: Ignoring the underlying liability
The cheque cannot be examined completely in isolation from the transaction for which it was issued.
Mistake 4: Waiting until the last day
Calculating statutory periods at the last moment creates unnecessary risk.
Mistake 5: Treating a security cheque issue as automatically decisive
Whether Section 138 applies depends on the underlying liability and facts.
Mistake 6: Ignoring a legal notice
If you receive a cheque bounce notice, it should be reviewed promptly.
Frequently Asked Questions
Can a cheque bounce case be filed after 15 days?
No. The expiry of the 15-day payment period does not mean that the complaint should necessarily be filed on the very next day. Once the statutory cause of action arises, the complaint is subject to the limitation prescribed under Section 142. Ordinarily, the complaint is required to be made within one month from the date on which the cause of action arises, subject to applicable law regarding condonation of delay.
What is the 30-day rule for a bounced cheque?
Where Section 138 applies, the payee or holder in due course must make a written demand for payment within 30 days of receiving information from the bank regarding the return of the cheque unpaid.
When does the 30-day period start?
The statutory wording refers to the date on which the payee or holder in due course receives information from the bank regarding the return of the cheque unpaid.
The actual dates and documents should therefore be examined carefully.
How many days does the drawer get after receiving a cheque bounce notice?
Section 138(c) provides the drawer 15 days from receipt of the notice to make payment of the cheque amount.
Can a complaint be filed immediately after the cheque bounces?
Not necessarily.
The statutory process under Section 138 includes the written demand notice and the 15-day period provided to the drawer for payment.
The complaint is subject to the subsequent requirements and limitation prescribed under Section 142.
What happens if payment is made within 15 days of receiving the notice?
Where the statutory requirements are otherwise applicable, payment within the 15-day period under Section 138(c) affects the statutory basis for prosecution under Section 138.
The facts and payment records should nevertheless be preserved carefully.
Is a security cheque covered by Section 138?
A cheque described as a security cheque is not automatically outside Section 138.
The relevant question can include whether a legally enforceable debt or liability existed when the cheque was presented and whether the other statutory requirements were satisfied.
What if the 30-day notice period has already expired?
Do not assume that the case is automatically over without examining the dates and circumstances.
The statutory timelines should be calculated from the relevant bank information and documents. If you believe the deadline has been missed, obtain case-specific legal advice before taking further action.
What if I have received a cheque bounce notice?
Do not ignore it.
Check the cheque, bank return memo, underlying transaction, amount claimed, date of dishonour, notice date and proof of service. The appropriate response depends upon the facts and documents of the case.
Cheque Bounce Cases in Delhi and Dwarka
Cheque dishonour disputes can involve questions relating to:
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- Section 138 NI Act
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- Statutory demand notices
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- Security cheques
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- Business and commercial transactions
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- Loans and advances
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- Unpaid invoices
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- Partnership and company transactions
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- Settlement of cheque bounce disputes
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- Defence to Section 138 proceedings
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- Filing and contesting complaints
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- Related civil proceedings
Each matter should be assessed on its own facts, documents and applicable law.
Legal Consultation
Need to Understand Your Cheque Bounce Matter?
If you are dealing with a cheque dishonour, Section 138 notice, security cheque dispute or related payment dispute, the relevant documents and statutory dates should be examined before deciding the next legal step.
Advocate Ajay Malik
Advocate, Delhi
Legal consultation and representation in appropriate matters before courts and tribunals, subject to the nature and jurisdiction of the case.
Phone: +91-8766252309
Website: advajaysinghmalik.com
Office – Dwarka, Delhi
A-52, B1 Floor, Sector-19, Dwarka, Delhi – 110075
Chamber – Dwarka District Court
Chamber No. 503, Lawyers’ Block, Dwarka District Court Complex, Sector-10, New Delhi – 110075
Important Legal Disclaimer
This page is intended for general legal information and educational purposes only. It does not constitute legal advice or create an advocate-client relationship.
The application of Section 138 of the Negotiable Instruments Act, 1881 depends on the facts, documents, statutory requirements and applicable judicial decisions in each matter.
Statutory periods should be calculated from the relevant dates and documents in the particular case. Readers should obtain independent legal advice before taking or refraining from any legal action.
Laws and judicial interpretations may change. Please verify the law applicable to your case at the relevant time.
RELATED GUIDES
Cheque Bounce Legal Notice: What You Need to Know
Cheque Bounce and the 30-Day Limitation Period
Security Cheque: When Can Section 138 Apply?
How to Reply to a Cheque Bounce Legal Notice
Section 138 NI Act: What Happens After the Complaint Is Filed?