What Section 138 covers
Section 138 of the Negotiable Instruments Act, 1881 makes the dishonour of a cheque a criminal offence in certain circumstances. It is one of the most commonly used remedies in Indian courts for recovering money owed under a cheque.
The provision is designed to give credibility to cheques as a means of payment. It applies only where the cheque was issued to discharge a legally enforceable debt or liability, and only if strict procedural steps are followed.
Essential conditions
For an offence under Section 138, broadly the following must be satisfied:
- the cheque was drawn on an account maintained by the drawer;
- it was issued to discharge, in whole or in part, a legally enforceable debt or liability;
- it was presented to the bank within its period of validity, currently three months from its date;
- it was returned unpaid, for example for insufficient funds or because it exceeded the arrangement with the bank;
- the payee sent a written demand notice within the prescribed time; and
- the drawer failed to pay within fifteen days of receiving the notice.
Under Section 139, the court presumes, unless the contrary is proved, that the cheque was issued for the discharge of a debt or liability. The drawer can rebut this presumption with evidence.
The timeline
| Step | Time limit |
|---|---|
| Present the cheque | Within three months of the date on the cheque |
| Send demand notice to the drawer | Within 30 days of receiving information of dishonour from the bank |
| Drawer to make payment | Within 15 days of receiving the notice |
| File complaint before the Magistrate | Within one month after the 15-day period expires |
The court can condone delay in filing the complaint if sufficient cause is shown, but it is far safer to keep to the timelines.
Where to file and what happens
Under Section 142, the complaint is filed before the court within whose local jurisdiction the branch of the bank where the payee maintains the account is situated, where the cheque was delivered for collection through an account. The case is tried by a Magistrate, generally through a summary procedure.
The offence is punishable with imprisonment of up to two years, or a fine of up to twice the cheque amount, or both. Under Section 143A, the court may order the drawer to pay interim compensation of up to twenty per cent of the cheque amount in appropriate cases. The offence is compoundable, so parties can settle at any stage.
If you are the drawer
If you receive a demand notice, do not ignore it. Seek advice promptly. Possible defences can include that there was no legally enforceable debt, that the notice was defective or not served, or that the complaint was filed outside the time limits. Where the debt is genuine, settlement within the notice period avoids prosecution altogether.
Practical tips
- Keep the original cheque and the bank's return memo safely.
- Send the demand notice by a mode that gives proof of dispatch and delivery, such as registered post, and keep the receipts.
- Keep documents that prove the underlying debt, such as invoices, agreements or loan records.
- Diarise every deadline from the date you learn of the dishonour.
- Consider a parallel civil suit for recovery where appropriate.
This explainer is general information as of November 2026 and is not legal advice. It does not create an advocate-client relationship. Please seek advice on the specific facts of your matter.