Cheque Bounce Notice Format & Section 138 NI Act Guide

In the Indian business world, a bounced cheque is a serious offence. It's not just a civil dispute; it's a criminal offence under Section 138 of the Negotiable Instruments Act, 1881. If you've received a cheque that was dishonoured by the bank for "insufficient funds" or any other reason, you have strong legal remedies available.

However, the law requires you to follow a very strict procedure and timeline. Miss a deadline by even one day, and your case could be dismissed.

What is Section 138 of the NI Act?

Section 138 of the Negotiable Instruments Act makes the dishonour of a cheque a criminal offence if:

1. The cheque was issued for the discharge of a legally enforceable debt.
2. It was returned by the bank unpaid (bounced).
3. The drawer (person who signed the cheque) fails to pay within 15 days of receiving a legal notice.

Step-by-Step Procedure for Filing a Cheque Bounce Case

Step 1: Cheque Bounce Memo

When a cheque is dishonoured, the bank issues a "Cheque Return Memo" stating the reason for non-payment (e.g., "Funds Insufficient"). You must collect this memo immediately.

Step 2: Send Legal Notice (Within 30 Days)

You must send a formal legal notice to the drawer within 30 days of receiving the cheque return memo.
What to include:

• Details of the cheque (Number, Date, Amount, Bank).
• Date of dishonour and reason.
• A demand to pay the amount within 15 days of receipt of the notice.
• Statement that legal action will be taken if unpaid.

Step 3: Wait for 15 Days

You cannot file a case immediately. You must give the drawer 15 days from the date they receive the notice to make the payment. If they pay, the matter ends there.

Step 4: File Complaint (Within 30 Days)

If the drawer fails to pay within the 15-day notice period, you must file a criminal complaint before the Magistrate within 30 days from the expiry of the notice period.

Crucial Timelines to Remember

• Cheque Validity: 3 months from the date of issue.
• Notice Deadline: 30 days from notification of bounce.
• Payment Period: 15 days for the drawer to pay.
• Filing Deadline: 30 days after the 15-day payment period expires.

Common Defences Used by Accused

Be prepared. The accused might claim:

• The cheque was for security, not debt.
• The signature is forged.
• The notice was never received (that's why RPAD is essential).

Frequently Asked Questions

What if the cheque was given as "security"?

This is a common defense. However, Indian courts have held that if a liability exists on the date of the cheque, even a security cheque can attract Section 138 if dishonoured.

Can I file a case anywhere in India?

No. As per the 2015 amendment, the case must be filed in the court having jurisdiction over the branch of the bank where the payee (you) maintains the account.

Can directors be held liable for a company's bounced cheque?

Yes. Under Section 141 of the NI Act, not just the company but also every person who was in charge of the business (like Directors) can be prosecuted.

Key Takeaways

• ✅ Section 138 is a criminal offence, not just civil.
• ✅ Strict timelines apply: 30 days for notice, 15 days for payment, 30 days to file.
• ✅ Jurisdiction lies with the complainant's bank branch.
• ✅ Always send notice via Registered Post (RPAD).

Related reads: Legal Notice for Recovery · Breach of Contract Remedies