Section 138 NI Act — Complete Cheque Bounce Procedure, Notice, Limitation and Defences (2026)

Section 138 requires every one of these elements to be made out, in this exact sequence, for an offence to be made out:

1. A cheque was drawn by the accused, on a bank account maintained by him.
2. The cheque was presented to the bank for payment within its validity period (currently 3 months from the date written on the cheque, per RBI directive).
3. The cheque was returned unpaid for insufficient funds or because it exceeds the arrangement made with the bank.
4. The payee gave notice in writing to the drawer, within 30 days of receiving information from the bank about the dishonour, demanding payment of the cheque amount.
5. The drawer failed to pay within 15 days of receipt of the notice.

All five must coexist. Failure of any one means no offence under Section 138. The most frequently failed elements (in this order) are:

• Notice not sent within 30 days — fatal.
• Notice not actually served on the drawer — survivable if other modes of service are proved.
• Complaint not filed within the 30-day window after the 15-day cure period — fatal under Section 142.
• Cheque not presented within validity — fatal.

Most Section 138 cases lost on technicality are lost on items 1 or 3 (notice mechanics).

The notice under Section 138(b) is the single most important document in the case. The Supreme Court in C.C. Alavi Haji v Palapetty Muhammed ((2007) 6 SCC 555) settled the validity standards. Required elements:

• Addressed to the drawer at the address on the cheque or the last known address.
• States the cheque particulars — number, date, amount, drawee bank.
• States the dishonour — when presented, when returned, reason.
• Demands payment of the cheque amount (not interest, costs etc. — those are separate civil claims; mixing them does not invalidate the notice but a pure demand is cleaner).
• Sent within 30 days of receipt of the bank's intimation of dishonour (the dishonour memo / cheque-return memo).

Modes — Speed Post / Registered Post / Courier / WhatsApp / e-mail. The Supreme Court in Indra Kumar Patodia v Reliance Industries ((2012) 13 SCC 1) and clarifications since have accepted email and WhatsApp service where the address/number is acknowledged by the drawer. Best practice in 2026: send by Registered Post AD + e-mail + WhatsApp. Retain all three proofs.

Refused / unclaimed notices — under Section 27 of the General Clauses Act and C.C. Alavi Haji (supra), refused / unclaimed notices are deemed to have been served. The complainant proves the address was correct and the notice was tendered.

Computing the 30 days — the count begins from the date the payee received the bank's intimation of dishonour, not the date the cheque was returned. Get this date from your bank statement / dishonour memo and use it as the start.

When to file: 30 days after expiry of the 15-day cure period, i.e. between Day 16 and Day 45 after the notice was received by the drawer (Section 142(1)(b)).

Where to file — territorial jurisdiction is governed by Section 142(2) introduced by the 2015 amendment (reversing Dashrath Rupsingh Rathod v State of Maharashtra (2014) 9 SCC 129). Filing must be done at the place where the cheque is delivered for collection through the account of the payee — i.e. the place where the payee maintains his bank account. This is now the only valid jurisdiction.

Form — a complaint petition under Section 200 CrPC, on plain paper or stamp paper depending on state, with the following enclosures:

1. Original dishonoured cheque.
2. Original bank dishonour memo.
3. Copy of the statutory notice + RPAD/courier receipt + tracking proof.
4. Affidavit of the payee under Section 145(1) NI Act (replaces oral examination-in-chief).
5. Memo of parties.
6. List of documents.

Court fee — varies by state, typically nominal (₹50 to ₹500). The complaint goes to the Judicial Magistrate / Metropolitan Magistrate.

Cognisance — Section 142(1)(a) requires that the complaint be filed in writing (oral complaint not accepted). On receipt, the Magistrate records the complainant's sworn statement (or accepts the affidavit under Section 145), examines documents, and either issues summons / process under Section 204 CrPC or dismisses under Section 203 CrPC. The complainant's evidence at the cognisance stage is examined for whether the five elements above are prima facie made out.

The Negotiable Instruments (Amendment) Act 2018 introduced two significant changes to give bite to Section 138:

Section 143A — Interim compensation

• The trial court may direct the accused to pay up to 20% of the cheque amount as interim compensation to the complainant, within 60 days of the direction.
• This is at the cognisance stage or at the framing of charge — well before trial.
• If the accused is finally acquitted, the complainant must refund the interim compensation with interest under Section 143A(4).
• This provision is discretionary, but trial courts have been increasingly willing to order it where the dishonour appears clear-cut.

Section 148 — Deposit on appeal

• When an accused convicted under Section 138 appeals, the appellate court may direct deposit of a minimum 20% of the fine/compensation awarded before the appeal is taken on file (Section 148(1)).
• This addressed the chronic problem of convicted drawers filing endless appeals to delay actual payment.

Summary trial under Section 143

• Most Section 138 cases are now tried as summary trials under Section 143 read with Section 262 CrPC.
• Sentence under summary trial is capped at one year (Section 143(2)), but cases involving cheque amounts > ₹5 lakhs may be tried as regular summons cases at the Magistrate's discretion.
• Summary trial timelines: the Section explicitly says the Court 'shall make endeavour to conclude the trial within six months'. In practice it takes 2-3 years; six months is the aspiration, not the norm.

Defences that work (i.e. result in acquittal):

1. No legally enforceable debt or liability (Section 138 main provision) — if the drawer can prove the cheque was given as a security deposit that was no longer due, or as a friendly accommodation, or for a debt already time-barred under the Limitation Act, the offence fails. This is the most common winning defence (per Krishna Janardhan Bhat v Dattatraya Hegde (2008) 4 SCC 54).
2. Cheque was misused / blank cheque filled by the payee fraudulently — requires positive evidence; the presumption under Section 139 has to be rebutted on preponderance of probabilities. Bank account closing date + the date filled on the cheque mismatch is the strongest evidence here.
3. Notice was defective or not actually demanding the cheque amount — increasingly difficult after C.C. Alavi Haji, but pleading creative defects can occasionally succeed.
4. Complaint filed beyond Section 142(1)(b) — fatal; courts have no power to condone delay except under Section 142(b) proviso (sufficient cause).

Defences that don't work:

• I had funds the next day — irrelevant; offence is complete on dishonour + non-payment within 15 days of notice.
• I stopped payment in good faith — does not absolve unless stop-payment was for a genuine reason (e.g. lost cheque reported to bank); Goa Plast v Chico Ursula D'Souza (2003) 3 SCC 232 settled this.
• Settlement after the complaint was filed — discharges the criminal liability only if recorded by the Court under Section 320 CrPC (now Section 359 BNSS) read with Damodar S Prabhu v Sayed Babalal H (2010) 5 SCC 663 cost-payment formula; mere private settlement does not.

Under Section 139, there is a statutory presumption that the holder of a cheque received it for the discharge of a debt or liability. The burden of rebutting this presumption is on the drawer, on a preponderance of probabilities (not beyond reasonable doubt). Most defences fail because the drawer does not lead positive evidence to rebut.