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Cheque dishonour for insufficient funds, a closed account or a stop-payment on a debt is a criminal offence under Section 138 of the Negotiable Instruments Act, with up to two years' jail and a fine of up to twice the amount. But it runs on a strict clock: written demand notice within 30 days of the bank's return memo, 15 days for the drawer to pay, then a complaint in the magistrate's court within one month of that. Miss any of these and the criminal route closes. Once the case is on, you can ask the court for interim compensation of up to 20% of the cheque amount while the trial runs, and the law presumes the cheque was for a debt unless the drawer proves otherwise.
Cheque dishonour for insufficient funds, a closed account or a stop-payment on a debt is a criminal offence under Section 138 of the Negotiable Instruments Act, with up to two years' jail and a fine of up to twice the amount. But it runs on a strict clock: written demand notice within 30 days of the bank's return memo, 15 days for the drawer to pay, then a complaint in the magistrate's court within one month of that. Miss any of these and the criminal route closes.
Once the case is on, you can ask the court for interim compensation of up to 20% of the cheque amount while the trial runs, and the law presumes the cheque was for a debt unless the drawer proves otherwise.
A plywood supplier in Adoor holds a ₹3.6 lakh cheque from a builder that returns 'funds insufficient' on 3 March. He sends a registered demand notice on 20 March; the builder ignores it; the complaint is filed on 25 April at the magistrate's court covering the supplier's own bank branch. At the first hearings he applies under Section 143A and is awarded ₹72,000 interim compensation. The builder settles in full before trial.
Five ingredients: a cheque drawn for a legally enforceable debt; presented within its validity (three months); returned unpaid for insufficient funds or a comparable reason (account closed and stop-payment are treated the same way); a written notice demanding the amount within 30 days of receiving the return memo; and failure to pay within 15 days of the notice being received.
The complaint is filed within one month after the 15 days expire, in the court with jurisdiction over the branch where you presented the cheque (Section 142(2), since 2015). Section 139 presumes the cheque was issued for a debt; the drawer must rebut it. Section 143A (2018) allows interim compensation up to 20%, refundable with interest if the drawer is acquitted; the Supreme Court in 2024 made clear it is discretionary, so apply with a clear prima facie case.
Section 148 requires a convicted drawer to deposit at least 20% to appeal. The offence is compoundable at any stage: settlement ends it. Re-presenting a bounced cheque within validity creates a fresh cause of action if it bounces again. Company cheques can bring the signatory and the directors in charge within the case. A civil suit for the money remains available in parallel, with a three-year limitation.
The return memo: date of receipt and reason stated Notice: by registered post or courier with acknowledgment, to the address on record, within 30 days, stating cheque details and demanding the amount within 15 days Deemed service: a notice correctly addressed and returned 'refused' or 'unclaimed' is generally treated as served Invoice, delivery proof or agreement showing the debt The drawer's other cheques: each bounce is a separate offence
Calling the customer for three weeks and then finding the 30-day notice window has closed. Send the notice first; negotiate after. Also: a post-dated cheque given as 'security' can still attract Section 138 if a debt existed when it was presented; courts look at the facts.
Magistrate courts in Kerala carry heavy Section 138 dockets and use summary procedure; Lok Adalats (Legal 2) routinely settle these, and a settlement there has decree force. NRI payees can file and can often give evidence by video conference.
Cheque ₹3.6 lakh bounced 3 March. Notice by 2 April (sent 20 March; received 24 March). Pay-by date 8 April. Complaint by 8 May. Interim compensation sought: up to ₹72,000. On conviction: fine up to ₹7.2 lakh and compensation ordered to the payee.
A cheque issued as a gift or with no underlying debt is outside. A dishonour for 'signature mismatch' or 'payment stopped' needs careful pleading. If the drawer has died, Section 138 does not survive against the estate; a civil claim does.
Get the return memo and send the demand notice this week, by registered post Calendar day 15 after receipt and the month after that File the complaint with the cheque, memo, notice and postal proofs; apply under 143A
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Negotiable Instruments Act, 1881, Sections 138, 139, 142, 143A, 147, 148 · Supreme Court, Rakesh Ranjan Shrivastava v State of Jharkhand (2024) on 143A · Your bank's return memo and postal records Last checked: 22 August 2026. Rates, limits and whether you may qualify change. Confirm with the official source before you act. Ask Kerala Rising: Use only general, non-identifying facts.
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