When a cheque you were given comes back unpaid, Section 138 of the Negotiable Instruments Act, 1881 gives you a criminal remedy in addition to a civil one. It is effective precisely because it is strict — and the strictness is all about dates.
1. The cheque must be presented in time
A cheque is valid for three months from the date written on it. It must be presented to the bank within that period. A cheque presented after it has expired cannot found a Section 138 complaint.
2. Notice within thirty days of the return memo
When the bank returns the cheque, it gives you a return memo stating the reason. From the day you receive that memo, you have thirty days to send a written demand to the drawer for the amount of the cheque.
Keep the memo and note the date it reached you. It is the first thing an advocate will ask for.
3. Fifteen days for the drawer to pay
The drawer has fifteen days from the date they receive your notice to pay. If they pay within that time, there is no offence.
4. Complaint within one month
If the fifteen days pass without payment, the complaint must be filed before the Magistrate within one month from the date the cause of action arose — that is, from the end of those fifteen days. The court can condone delay for sufficient cause, but you should not plan on it.
What happens next
The case is tried summarily. The court may direct the drawer to pay interim compensation of up to twenty per cent of the cheque amount under Section 143A. The offence is compoundable, which means the parties can settle at any stage — and many do.
If you are the drawer
A returned cheque is not automatically an offence. The cheque must have been issued for a legally enforceable debt, and the notice must have been properly sent and received. Those questions deserve an advocate’s reading before you either pay or ignore the notice.
This note is general information, not legal advice. Your own facts may change the position; speak to an advocate before acting.
