A bounced cheque catches most people off guard twice over — first the payment failure itself, then the discovery that Section 138 of the Negotiable Instruments Act makes it a criminal offence, not just a civil debt. Whether you've received a cheque that bounced or you're the one who issued it, the next 30-45 days matter more than people realise, because the law runs on strict deadlines that don't bend for being unaware of them.
What actually counts as an offence
Section 138 applies when a cheque is dishonoured — usually for insufficient funds, or because the account was closed or the signature didn't match — and the cheque was issued to discharge a legally enforceable debt or liability. A cheque given as a gift, or one that wasn't meant to settle an actual debt, generally doesn't qualify, which is often the first thing worth examining carefully if you're the one accused.
The three deadlines that decide everything
This is where most cases are won or lost on technicalities alone, long before anyone argues the facts:
- Presenting the cheque: it must be presented to the bank within its validity period, generally within 3 months of the date on it.
- Sending the legal notice: once the cheque bounces, the payee has 30 days from the bank's dishonour memo to send a written demand notice to the drawer.
- Filing the complaint: if the drawer doesn't pay within 15 days of receiving that notice, the payee then has 30 days from the end of that 15-day window to file a criminal complaint in court.
Miss any one of these windows without a valid reason, and the case can collapse on procedure alone — which cuts both ways depending on which side of the cheque you're on.
What the court can actually order
A conviction under Section 138 can mean imprisonment of up to two years, a fine of up to twice the cheque amount, or both. In practice, most cases resolve through compounding — the offence is compoundable, meaning the parties can settle at almost any stage, and courts generally encourage this over a full trial.
Interim compensation — a common misunderstanding
Many people assume that once a complaint is filed, the court will automatically order the accused to pay up to 20% of the cheque amount as interim compensation under Section 143A. That's not quite right. The Supreme Court has clarified that this power is discretionary, not automatic — the court has to be satisfied there's a prima facie case before ordering any interim payment, and it weighs factors like the nature of the transaction and the relationship between the parties. If you're on the receiving end of an interim compensation application, this is worth challenging rather than assuming it's a formality.
If there's a conviction and the matter goes to appeal, Section 148 allows the appellate court to separately require a deposit of at least 20% of the fine or compensation awarded by the trial court, on top of anything already paid under 143A.
If you're the one who issued the cheque
Don't ignore the notice. A surprising number of cases escalate simply because the drawer assumes it will "go away" or that a phone call to the payee settles things informally. Once the 15-day window closes without payment or a documented settlement, the complaint can be filed, and from there the matter is in court's hands, not a conversation. If there's a genuine dispute about whether the debt existed, that defence needs to be built properly from the start, not raised as an afterthought.