Practice note

Dishonour of Cheques under Section 138 of the Negotiable Instruments Act

Dishonour of a cheque issued in discharge of a legally enforceable debt or other liability is an offence under Section 138 of the Negotiable Instruments Act, 1881, punishable with imprisonment for a term which may extend to two years, or with fine which may extend to twice the amount of the cheque, or with both. The remedy is subject to strict statutory timelines.

Statement of law as on 19 October 2026Lex Meridian · Advocates & Legal Consultants

In brief

The cheque must be presented within its period of validity, and a written demand notice must be issued within thirty days of receipt of information of dishonour from the bank.
If payment is not made within fifteen days of receipt of the notice, the complaint must be filed within one month thereafter (Section 142).
Jurisdiction lies with the court within whose local limits the payee's bank branch is situated (Section 142(2), inserted in 2015).
The trial court may order interim compensation of up to twenty per cent of the cheque amount (Section 143A), and the appellate court may direct a deposit of at least twenty per cent of the fine or compensation (Section 148).

Governing law

Negotiable Instruments Act, 1881: Sections 118 and 139 (presumptions), 138 (offence), 141 (offences by companies), 142 (cognizance and jurisdiction), 143 (summary trial), 143A (interim compensation), 145 (evidence on affidavit), 147 (compounding), 148 (deposit in appeal).
Bharatiya Nagarik Suraksha Sanhita, 2023: Procedure for issue of process, trial, appeal and revision.

How the matter is handled

Stage	Steps taken	Indicative time
1. Demand notice	Statutory notice to the drawer demanding payment of the cheque amount.	Within 30 days of the return memo
2. Period for payment	The drawer may pay within fifteen days of receipt of the notice.	15 days
3. Complaint	Complaint before the Magistrate under Section 142, supported by affidavit and documents.	Within the following one month
4. Summons and trial	Summary trial with evidence on affidavit; application for interim compensation under Section 143A; settlement at any stage.	Depends on the court
5. Judgment and appeal	Conviction or acquittal; appeal with deposit under Section 148, or compounding under Section 147.	Depends on the court

Leading judicial authorities

Rangappa v. Sri Mohan
(2010) 11 SCC 441
The presumption under Section 139 includes the existence of a legally enforceable debt or liability; it is rebuttable, and the accused may rebut it on a preponderance of probabilities.
In Re: Expeditious Trial of Cases under Section 138 of the N.I. Act, 1881
(2021) 16 SCC 116
Issued directions for the expeditious disposal of cheque-dishonour cases, including summary trial, inquiry before issuing process to an accused residing outside the jurisdiction, and joint trial of cases arising from one transaction.
Damodar S. Prabhu v. Sayed Babalal H.
(2010) 5 SCC 663
Laid down a scheme of graded costs to encourage early compounding of offences under Section 138.
P. Mohanraj v. Shah Brothers Ispat Pvt. Ltd.
(2021) 6 SCC 258
The moratorium under Section 14 of the Insolvency and Bankruptcy Code covers Section 138 proceedings against a corporate debtor, though not against its directors.

Latest judgments & updates

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Recent judgments of the Supreme Court, the High Courts and tribunals, and court reports, concerning Cheque Bounce. Updated automatically through the day.

Documents to keep ready

The original cheque and the bank's return memo
Proof of the underlying debt: invoice, agreement, ledger or messages
Copy of the demand notice with proof of dispatch and delivery
Authority letter or board resolution, for companies

Frequently asked questions

Are directors liable when a company's cheque is dishonoured?

Under Section 141, every person who was in charge of and responsible for the conduct of the company's business at the relevant time may be prosecuted, provided the complaint contains specific averments to that effect.

Can the case be settled?

Yes. The offence is compoundable under Section 147 at any stage of the proceedings, including in appeal.

This note states the law in general terms as on 19 October 2026. It is not legal advice and does not create an advocate–client relationship. Judgments are summarised for reference and should be read in full from the official reports; the facts of each matter may alter the position.

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