Dishonour of a cheque for insufficient funds is an offence under Section 138 of the Negotiable Instruments Act, 1881, provided the strict timeline in the section is followed. Missing a deadline can defeat an otherwise strong case.
The timeline
| Step | Time limit | Provision |
|---|---|---|
| Present the cheque to the bank | Within its validity (3 months from the date of the cheque) | Sec. 138(a), RBI directions |
| Send a written demand notice to the drawer | Within 30 days of receiving information of dishonour | Sec. 138(b) |
| Drawer may pay | Within 15 days of receiving the notice | Sec. 138(c) |
| File the complaint | Within 1 month of the cause of action | Sec. 142(1)(b) |
Use the free Cheque Bounce Timeline calculator to work out your dates.
The demand notice
The notice must demand payment of the cheque amount and should be sent to the drawer's correct address by a mode that gives proof of delivery. Keep the bank's return memo and the postal or courier receipts.
Where to file
Under Section 142(2), the complaint is filed in the court within whose jurisdiction the payee's bank branch is situated, where the cheque was delivered for collection through the payee's account.
During the case
- Interim compensation: the court may direct the drawer to pay up to 20% of the cheque amount as interim compensation (Section 143A).
- Appeal deposit: on appeal against conviction, the appellate court may direct a deposit of at least 20% of the fine or compensation (Section 148).
- Compounding: the offence can be compounded, that is settled, at any stage (Section 147).
Punishment
Imprisonment of up to two years, or a fine of up to twice the cheque amount, or both.
If you have received a notice: respond promptly. Paying within 15 days of receiving the notice prevents the offence from being made out.
This article is general information and is not legal advice. Facts matter, so please consult an advocate about your situation.