Cheque bounce — Section 138 NI Act

The offence

Section 138 of the Negotiable Instruments Act, 1881 makes it an offence to issue a cheque for the discharge of a debt or liability that is returned unpaid for insufficiency of funds, “payment stopped”, “account closed” or a similar reason — provided the payee follows the statutory steps. The punishment is imprisonment up to two years, or fine up to twice the cheque amount, or both, and the court also awards compensation.

The timeline that decides everything

The complaint is filed in the court within whose jurisdiction the payee’s bank branch is located (Section 142(2)), which for a Delhi account holder means the district court complex for that area. A late complaint can be entertained only if the court is satisfied that there was sufficient cause for the delay.

Presumptions and the defence

Once the signature is admitted, Section 139 raises a presumption that the cheque was issued for a legally enforceable debt or liability; the burden shifts to the accused to rebut it on a preponderance of probabilities. Typical defences are that the cheque was given as security and not for a debt, that the debt was time-barred or did not exist in the amount claimed, that the cheque was misused or altered, that the notice was defective or not served, or that the complaint is out of time. Company cases bring in Section 141 — who was “in charge of and responsible for” the conduct of business — and directors are regularly discharged where the complaint does not plead their role.

What the chambers does

For the payee — a legally correct demand notice sent within time with proof of service; the complaint with the affidavit-evidence and documents; an application for interim compensation under Section 143A (up to 20% of the cheque amount at the stage of framing notice, at the court’s discretion); pursuing the summary trial to conviction and the compensation order; execution of the fine or compensation; and the appeal if the accused is acquitted.

For the accused — examining the notice, dates and jurisdiction for fatal defects; the reply to the notice; appearance and bail on summons; the defence evidence; compounding at any stage (Section 147 — the Supreme Court in Damodar S. Prabhu v. Sayed Babalal H. (2010) set graded costs for late compounding); appeal against conviction before the Sessions Court, which ordinarily requires a deposit of a minimum of 20% of the fine or compensation under Section 148; and revision or quashing where the complaint is legally unsustainable.

Delhi courts

Section 138 complaints in Delhi are tried by the Metropolitan Magistrates (NI Act) at Tis Hazari, Saket, Patiala House, Karkardooma, Rohini and Dwarka, with dedicated NI Act courts and evening courts in several complexes. Summary trial procedure applies, and the Delhi courts actively refer cases to mediation for settlement.

Documents to keep ready

• The original cheque and the bank’s return memo (or cheque-return advice)
• The demand notice, postal or courier receipt and tracking or acknowledgement
• The reply to the notice, if any
• The underlying transaction — invoice, loan agreement, ledger, delivery challans, bank statements showing the advance
• For the accused: proof of any payment already made, the security or agreement under which the cheque was given, and bank statements

Frequently asked questions

What if I missed the 30-day period for sending the notice?

The notice must be sent within 30 days of receipt of the return memo. If the cheque is still valid, you may re-present it; a fresh dishonour gives a fresh cause of action and a fresh 30-day period. Otherwise, the criminal remedy is lost, but a civil suit for recovery remains available.

Can the accused get the case transferred or dismissed for wrong jurisdiction?

If the complaint is filed in a court other than the one where the payee’s bank branch is located, it is liable to be returned for filing in the proper court. The chambers checks jurisdiction at the outset for both sides.

Is interim compensation mandatory?

No. Section 143A is discretionary; the court considers the nature of the transaction, the defence and the accused’s means before directing up to 20% of the cheque amount, which is refundable with interest if the accused is acquitted.

Can the case be settled after conviction?

Yes. The offence is compoundable at any stage, including in appeal, subject to the costs framework laid down by the Supreme Court. Many cases are settled through mediation at the summons stage itself.

Is imprisonment usual?

Courts in Delhi commonly impose a fine or compensation up to twice the cheque amount with a default sentence, and imprisonment where the accused does not pay; the sentence is at the discretion of the Magistrate.

This page is general information about the area of practice, not legal advice. Last reviewed: 2026-09-22