Cheque bounce under section 138: what the law says
When a bounced cheque becomes a criminal offence, what the punishment is, and when section 138 does not apply.
General legal information, not legal advice. Timelines are indicative and depend on your facts. Consult an advocate or CA before acting on a notice, dispute or recovery.
Short answer
If a cheque given to pay a real debt bounces because the account has too little money, the person who wrote it can face a criminal case under section 138 of the Negotiable Instruments Act. But only if you, the payee, follow a strict timeline: notice within 30 days, 15 days for them to pay, and a complaint within the next month.
When is a bounced cheque an offence?
All five must be true:
| # | Condition | What it means in practice |
|---|---|---|
| 1 | The cheque was drawn on the drawer's own bank account | A cheque signed by someone on another person's account does not qualify |
| 2 | It was given to pay a legally enforceable debt or liability | A gift cheque or a cheque for a time-barred debt does not qualify |
| 3 | It was presented within its validity | 3 months from the cheque date |
| 4 | The bank returned it unpaid | For "insufficient funds" or "exceeds arrangement". Courts also treat "account closed", "payment stopped by drawer" and "signature mismatch" as covered when the aim was to avoid payment |
| 5 | The drawer did not pay within 15 days of receiving your written notice | Notice must go within 30 days of the bank's return memo |
Punishment
- Imprisonment up to 2 years, or
- Fine up to twice the cheque amount, or
- Both.
In practice most cases end in a settlement or an order to pay compensation. Courts now push hard for early payment (see Interim compensation, appeals and settlement).
When section 138 does NOT apply
- The cheque was a gift or donation.
- The debt is time-barred (more than 3 years old with no acknowledgement) when the cheque was given.
- You sent the notice late (after 30 days) or filed the complaint before the 15-day window ended.
- The cheque was presented after 3 months.
- Payment by ECS/NACH failed. That falls under section 25 of the Payment and Settlement Systems Act instead (see separate guide).
A cash loan of ₹20,000 or more that broke the income-tax cash rules is still a legally enforceable debt for section 138. The Supreme Court confirmed this in Sanjabij Tari v. Kishore S. Borcar (2025). The tax penalty is a separate matter.
Presumption in your favour
Once the signature on the cheque is admitted, the court presumes the cheque was given for a debt (sections 118 and 139). The drawer has to prove otherwise. This is why section 138 cases are strong for genuine creditors.
Example
Sharma Traders sells goods worth ₹2,36,000 to Verma Stores. Verma gives a cheque dated 10 October. It bounces on 20 October with the remark "Funds Insufficient". Sharma sends a legal notice on 25 October. Verma receives it on 28 October and does not pay by 12 November. Sharma can file a complaint from 13 November up to about 12 December.
In Hisab Central
- Record the bounce as a reversal of the receipt (see Accounting and GST for a bounced cheque).
- Note the return memo date and notice date in the narration so the AI Audit can remind you of deadlines.
Common mistakes
- Waiting for "one more try" and missing the 30-day notice window. You can re-present a cheque within validity, and a fresh bounce gives a fresh 30 days, but do not rely on this without advice.
- Demanding interest or other dues in the notice without clearly stating the cheque amount separately.
- Filing the complaint in the wrong city (see Where to file).
People also ask
- Cheque bounce hone par kya karein? Get the return memo, send a legal notice within 30 days, and wait 15 days for payment.
- Is cheque bounce a criminal case? Yes, under section 138, if the timeline is followed.
- Can I also file a civil suit? Yes. A summary recovery suit can run alongside the criminal complaint.
Sources
- India Code — Negotiable Instruments Act, 1881 (indiacode.nic.in)
- Supreme Court — Sanjabij Tari v. Kishore S. Borcar, 2025 INSC 1158 (26 Sep 2025)
Last verified: 30 Sep 2026.