title: "Section 138 NI Act: the cheque bounce offence explained" description: "Section 138 of the Negotiable Instruments Act 1881 makes dishonour of a cheque a criminal offence with specific procedural conditions. Here is what the law says and how the process works." datePublished: "2026-06-22T12:00:00+05:30" dateModified: "2026-06-22T12:00:00+05:30" author: "NyayX Team" ogImageTitle: "Section 138 NI Act: cheque bounce offence explained"
If someone gives you a cheque and it bounces, that is not just a civil dispute. Under Indian law it can be a criminal matter. Section 138 of the Negotiable Instruments Act 1881 is the provision that makes dishonour of a cheque a punishable offence, subject to certain conditions being met. It is one of the most frequently litigated sections in Indian Magistrate courts.
What section 138 NI Act actually says
Section 138 of the Negotiable Instruments Act 1881 creates a criminal offence when a cheque is returned unpaid by the bank because the account has insufficient funds, or because the amount exceeds whatever arrangement the drawer has with the bank.
The key requirement is that the cheque must have been issued to discharge, in whole or in part, a legally enforceable debt or other liability. A cheque given as a gift, or as a security deposit with no underlying liability, sits in different legal territory. The mainstream section 138 case is about a cheque given to pay back money that is actually owed.
The provision is not part of the Bharatiya Nyaya Sanhita or the 2024 criminal law overhaul. The Negotiable Instruments Act 1881 was not replaced or amended in that reform. Section 138 continues to operate exactly as it did before. Any claim you read suggesting it was subsumed into the BNS is incorrect.
The punishment under section 138
A person convicted under section 138 can face:
- imprisonment for a term which may extend to two years, or
- a fine which may extend to twice the amount of the cheque, or
- both.
The fine provision is significant. Courts can award a fine sufficient to compensate the payee, which is part of why section 138 is used even when the primary goal is recovering the money rather than sending the drawer to jail.
The preconditions: why they matter
Section 138 does not apply automatically the moment a cheque bounces. The law sets out a chain of conditions that must be satisfied before a valid complaint can be filed. Failing any one of them can defeat the case on procedural grounds alone.
1. The cheque must be presented within its validity period.
A cheque is valid for three months from the date on it. If the payee sits on the cheque and presents it after it expires, section 138 proceedings cannot follow from that presentation.
2. The cheque must be returned unpaid.
The bank must actually dishonour the cheque and issue a memo stating the reason. That memo, usually called a "cheque return memo" or "dishonour memo," is the starting point for the clock that follows.
3. The payee must send a written demand notice within 30 days.
After receiving the dishonour memo, the payee has 30 days to send a written notice to the drawer demanding payment of the cheque amount. This notice must be in writing. Verbal communication does not satisfy this requirement. The notice should make clear that the cheque has been dishonoured and call on the drawer to pay.
4. The drawer must fail to pay within 15 days of receiving the notice.
Once the drawer receives the demand notice, they have 15 days to make good on the payment. If they pay within this window, the criminal liability under section 138 does not arise. If they do not pay, the cause of action crystallises.
5. The complaint must be filed within one month of the cause of action.
The cause of action arises on the day after the 15-day payment window expires. The payee then has one month from that date to file a complaint before the appropriate Magistrate. Missing this limitation period can make the complaint time-barred, though courts have in some cases allowed condonation of delay.
These five conditions work together. If any one of them is not met, the accused can raise it as a defence. The demand notice in particular is litigated heavily. Courts have insisted on strict compliance: the notice must reach the drawer, the content must be clear, and it must be sent within the 30-day window.
Where to file and what happens next
The complaint is filed before a Judicial Magistrate of the First Class (or a Metropolitan Magistrate in metro areas). Jurisdiction can be taken at the place where the cheque was drawn, where it was presented, where it was returned unpaid, or where the demand notice was sent and received. The Supreme Court has clarified the jurisdictional position over the years; if in doubt, the payee's bank branch location is often a safe choice but a lawyer should confirm this for the specific facts.
Once the complaint is filed and cognizance is taken, the court issues process against the accused and the case proceeds. Section 138 cases can involve multiple hearings before they conclude, whether by conviction, acquittal, or compounding (settlement). Compounding is common and is permitted under section 147 of the NI Act, subject to consent of both parties and, in some circumstances, court approval.
Why hearing dates matter in practice
Section 138 cases form a substantial part of the docket in Magistrate courts across Delhi and other major cities. Both the complainant and the accused need to track every date carefully. Missing a hearing without explanation can have consequences: a complainant risks the complaint being dismissed for non-prosecution, and an accused risks a warrant.
If you are tracking a section 138 matter, keeping the cause list and case status in one place reduces the chance of missing a date. NyayX's bare act library has the full text of the Negotiable Instruments Act if you want to read the exact language of section 138 and the companion sections (139 to 147) that together govern this offence.
In short
Section 138 of the NI Act makes cheque dishonour a criminal offence when the cheque was issued to repay a debt and specific procedural steps are followed: the cheque must be presented in time, the bank must return it unpaid, the payee must send a written demand notice within 30 days, the drawer must fail to pay within 15 days of that notice, and the complaint must reach the Magistrate within one month of the cause of action arising. The maximum punishment is two years imprisonment or a fine up to twice the cheque amount or both. The law was not changed by the 2024 criminal law reforms and remains in force under the NI Act.