My cheque bounced. What do I do first and what are the time limits?

Section 138 of the Negotiable Instruments Act, 1881 is unforgiving about dates. The law is straightforward; the deadlines are what kill cases.

The clock

1. Cheque return memo. The bank returns the cheque unpaid with a memo. The date on that memo starts everything.
2. 30 days to send the demand notice, in writing, to the drawer, demanding payment of the cheque amount.
3. 15 days for the drawer to pay, counted from receipt of the notice.
4. One month to file the complaint. The cause of action arises when the 15-day payment period expires. Section 142(1)(b) requires the complaint within one month of that cause of action, subject to sufficient-cause condonation.

One precision on the last step. Section 142(1)(b) puts it as one month from the date on which the cause of action arises, not thirty days, and in a thirty one day month those are not the same date. Diary the earlier of the two and file well before either. Section 142 also settles two other things that get argued: only the payee or the holder in due course may complain, and the complaint must be in writing; and no court inferior to a Metropolitan Magistrate or a Judicial Magistrate of the first class can try the offence.

The three documents that carry the case

• The dishonoured cheque itself
• The bank's cheque return memo
• Proof the notice was sent and delivered: postal receipt and tracking or acknowledgement

Keep the originals. Courts want the original cheque and memo produced.

Which return reasons attract Section 138

Insufficiency of funds and an amount exceeding the arrangement are the two the section names. The courts have not read the section narrowly, and dishonour on other grounds has been held to attract it where the effect is the same, including an account that has been closed, payment stopped after the cheque was issued, and a signature that does not match the specimen. What matters is whether the cheque was returned unpaid for a reason attributable to the drawer, and whether there was a subsisting liability. A memo saying the instrument was drawn on a bank that never held the account, or a technical defect on the face of the cheque such as a post-dated cheque presented too early, sits differently and needs advice on the particular memo. Read the memo, do not paraphrase it, and reproduce its exact wording in the notice.

Re-presentation, and the second bite

A cheque may be presented more than once within its validity, which for bankers' purposes is three months from the date it bears. Each dishonour is capable of generating its own notice and its own cause of action, so a payee who lets one notice period lapse is not necessarily out of the criminal remedy: he can present again and, on a fresh dishonour, issue a fresh notice in time. What he cannot do is issue two notices on the same dishonour and count the second one, or sit on a valid cause of action indefinitely.

Recovery, not just punishment

Section 138 is criminal, punishable with up to two years or a fine up to twice the cheque amount, or both. But the practical leverage is money. Under Section 143A the court can direct interim compensation of up to 20 percent of the cheque amount before the trial concludes, and under Section 148 an appellate court can require a deposit of at least 20 percent. A large share of these matters settle once a serious notice and a complaint are on record.

Note that interim compensation under Section 143A is discretionary and not automatic. In Rakesh Ranjan Shrivastava v. State of Jharkhand (2024) the Supreme Court held that the word "may" in Section 143A(1) cannot be read as "shall", that the Magistrate must apply his mind to the merits and record reasons, and set aside an order made without doing so. Twenty per cent is the ceiling, not the norm, and both sides should be ready to argue the figure rather than assume it.

• The dishonoured cheque in original
• The bank's cheque return memo in original
• A copy of the demand notice as dispatched
• Postal receipt and tracking, or courier proof of delivery
• The acknowledgement card, or the returned unclaimed envelope unopened
• Documents evidencing the debt the cheque was issued against
• Board resolution or authorisation, where the complainant is a company

Where to file

Jurisdiction lies with the court where the branch of the payee's bank at which the cheque was presented is located. That rule comes from Section 142(2) of the Act, inserted in 2015 to end the forum shopping that followed the earlier case law. In Bengaluru these complaints go before the Metropolitan Magistrate having jurisdiction over that branch, and the city has benches that carry very heavy Section 138 dockets, which is worth knowing when you plan timelines.

One consequence people miss: if you deposit the cheque in a Bengaluru branch, you sue in Bengaluru, even though the drawer sits in Delhi. That is usually an advantage for the payee and a real cost for the drawer, and it is one reason a properly planned presentation matters.

Section 142(2) draws the line by reference to the account, not the branch counter. Where the cheque is delivered for collection through an account, jurisdiction is with the court where the branch of the bank at which the payee maintains that account is situated, and an Explanation deems a cheque deposited at any branch to have been delivered to the branch where the account is maintained. Where the cheque is presented for payment otherwise than through an account, it is the branch of the drawee bank where the drawer maintains his account. So banking a cheque into a Bengaluru account fixes Bengaluru even if you handed it in elsewhere.

If the notice comes back unclaimed

A demand notice that is refused or returned unserved is not fatal. Where the notice is sent to the correct address by registered post, service is presumed, and a drawer who avoided the postman cannot rely on that to defeat the complaint. What defeats it is sending the notice to an address you cannot show was correct. Take the address from the cheque, the contract, or a document the drawer has themselves given you, and keep the postal tracking. The full sequence, with the wording, is in our guide to the Section 138 procedure, and the defences that actually succeed are covered in our note on Section 138 defences.