Written and reviewed by Adv. Tanmay S. Shirsat, Advocate, High Court of Bombay. Consultations in English, Hindi and Marathi, in person or by video call. Last updated November 2026.
When Section 138 Applies
When a cheque issued to discharge a legally enforceable debt is returned unpaid, the drawer may be prosecuted under Section 138 of the Negotiable Instruments Act, 1881. The offence is punishable with imprisonment of up to two years, a fine of up to twice the cheque amount, or both.
- Insufficient funds or "exceeds arrangement": the classic case.
- "Payment stopped by drawer" and "account closed": these can also attract Section 138, as the Supreme Court held in MMTC Ltd. v. Medchl Chemicals (2002).
- Security cheques: a cheque given as security can be the basis of a complaint if the debt had become payable when it was presented, as held in Sripati Singh v. State of Jharkhand (2021).
Once the signature is admitted, Section 139 presumes the cheque was issued for a debt. The drawer can try to rebut that presumption at trial.
Strict Timelines
- Presentation: within the cheque's validity, currently three months from its date.
- Demand notice: in writing, within 30 days of receiving the bank's information that the cheque was returned.
- Time to pay: 15 days from the drawer's receipt of the notice.
- Complaint: within one month after those 15 days end. A late complaint needs the court to condone the delay.
A notice returned "refused" or "unclaimed" at the correct address is generally treated as served (C.C. Alavi Haji v. Palapetty Muhammed, 2007). Demand the cheque amount clearly; if you also claim interest or costs, show them separately.
For every deadline in detail, read the guide: Cheque bounce in Mumbai: the Section 138 notice, deadlines and complaint.
Where to File in Mumbai
Since the 2015 amendment, Section 142(2) places the case in the court that has jurisdiction over the branch of the payee's bank where the cheque was presented for collection. In Mumbai, that means the Metropolitan Magistrate court covering that branch, such as the courts at Esplanade, Bandra, Kurla or Andheri, depending on the branch.
Practical point: deposit the cheque in the branch where you want the case to be heard. Once presented, the court is fixed by that branch.
If You Have Received a Cheque Bounce Notice
- Count the 15 days: payment of the cheque amount within 15 days of receiving the notice prevents the offence from arising.
- Reply in writing: if the debt is disputed, or the cheque was misused, say so in a reply and keep proof of dispatch.
- Settle early if you settle: the offence is compoundable under Section 147. Under the guidelines in Damodar S. Prabhu v. Sayed Babalal H. (2010), settling at the first hearings costs nothing extra, while later settlement can carry costs of 10 to 20 percent of the cheque amount, depending on the court.
- Attend court when summoned: non-appearance leads to warrants. The offence is bailable, but bail still has to be sought on appearance.
During the Case
Cases are generally tried summarily, and the complainant's evidence can be given on affidavit (Section 145). The court may order the accused to pay interim compensation of up to 20 percent of the cheque amount under Section 143A. On appeal against a conviction, the appellate court may require a deposit of at least 20 percent of the fine or compensation under Section 148. Many cases settle through compromise, including before Lok Adalats.
Defences may include the absence of a legally enforceable debt, defects in the notice, limitation, and the circumstances in which the cheque was issued.
Civil Recovery Alongside the Complaint
- Summary suit (Order XXXVII CPC): a faster civil remedy on cheques and written contracts; the defendant needs the court's leave to defend.
- Commercial disputes: claims of a specified value may need pre-institution mediation under the Commercial Courts Act, 2015.
- Execution: enforcing the decree by attachment, sale or garnishee orders under Order XXI CPC.
Documents to Keep Ready
- The original dishonoured cheque and the bank's return memo
- The demand notice, with postal receipts and the tracking or acknowledgement
- Invoices, agreements, ledgers or loan documents showing the debt
- Messages and emails about payment, and any acknowledgement of the debt
- Your bank statement showing the return; for a company, a board resolution or authority letter
Common Questions
- Can I file a case for a cheque given as security: Yes, if the debt had become payable when the cheque was presented.
- The drawer is a company. Who is liable: Under Section 141, the directors or partners in charge of its business can be named, depending on the facts.
- I missed the 30-day notice deadline: if the cheque is still valid, it can be presented again; a fresh return starts a fresh 30 days. Otherwise, civil recovery may still be open.
- Can the case end in a settlement: Yes, at any stage, under Section 147.
General information about the law as of November 2026, not legal advice. The right course depends on the dates and documents in your case.