Recovery
The Negotiable Instruments Act runs on three deadlines: 30 days, 15 days, one month. Miss any of them and the offence is gone, however good the debt.
Check your DPDP readiness — free More on the blogA cheque comes back marked "funds insufficient" and the instinct is to call the drawer and keep calling. That is fine as commercial behaviour and useless as legal strategy, because section 138 of the Negotiable Instruments Act, 1881 is a criminal remedy on a clock, and the clock starts whether or not you are ready. What follows is the sequence, in the order it actually happens.
A cheque is valid for three months from the date written on it. Present it after that and the bank returns it as stale, which is not a dishonour under section 138 at all — there is no offence to complain about, only a debt. The dishonour also has to be for one of the reasons the section covers: insufficiency of funds, or the amount exceeding the arrangement with the bank. A cheque returned for a signature mismatch or a post-dating error sits outside it.
Proviso (b) to section 138 requires the payee to make a written demand within 30 days of receiving information from the bank that the cheque was returned unpaid. The trigger is the bank return memo, not the day you got round to opening the envelope. This is the deadline most people lose the case on. There is no extension, no condonation for having been in negotiation, and no second notice on a second presentation that resets it. Send the demand and keep proof of dispatch — the notice is the fact the whole complaint stands on. The cheque bounce notice on this site puts the cheque particulars, the return reason and the statutory 15-day demand in the form the section expects.
Proviso (c) gives the drawer 15 days from receipt of that notice to make the payment. If the money arrives inside the window, the matter is over: no offence is committed, whatever else you may still be owed. If it does not, the cause of action arises on the expiry of the fifteenth day. That date matters, because the next deadline runs from it.
Under section 142(1)(b) the complaint has to be filed within one month of the date the cause of action arose — that is, within a month of the 15 days expiring. A court can take a complaint filed later, but only if the complainant satisfies it there was sufficient cause for the delay, and "we were still hoping to settle" tends not to be it. Section 142(2), as amended in 2015, puts jurisdiction with the court where the bank branch of the payee — the branch where the cheque was delivered for collection — is situated. That was Parliament reversing a Supreme Court position and it usually works in the payee’s favour: you file where you bank, not where the drawer lives.
Section 143A is the part worth knowing about. It was inserted in 2018 precisely because the process had become a way to buy years, and it lets a court move money to the complainant while the trial is still running.
Section 147 makes the offence compoundable, which means the parties can settle at any stage and end it. Most section 138 matters finish that way. The value of the complaint is very often that it exists — a criminal case with a 20% interim compensation attached is a different negotiating position from an unpaid invoice.
Section 138 is about the dishonour, not the money. Acquittal on a technical failure — a late notice, a stale cheque — does not extinguish the underlying debt, which remains recoverable in a civil suit or, if your buyer is late paying a registered supplier, under the MSMED Act. See what late payment to an MSME actually costs for the interest that runs there.
Thirty days from the date you receive information from the bank that the cheque was dishonoured, under proviso (b) to section 138 of the Negotiable Instruments Act, 1881. The period runs from the bank return memo, not from when the cheque was deposited or when you read the memo. Missing it ends the section 138 remedy for that presentation.
Fifteen days from receiving the notice, under proviso (c) to section 138. If the payment is made within those fifteen days no offence is committed. If it is not, the cause of action arises when the fifteenth day expires, and the complaint must be filed within one month of that date under section 142(1)(b).
Section 138 provides imprisonment for up to two years, or a fine up to twice the cheque amount, or both. Since 2018 a court may also order interim compensation of up to 20% of the cheque amount under section 143A before the trial concludes, and an appellate court may require a deposit of at least 20% under section 148.
In the court within whose jurisdiction the payee’s bank branch is located — the branch where the cheque was delivered for collection — under section 142(2) as amended in 2015. In practice this means you usually file where you bank rather than where the drawer is based.
Yes. Section 147 makes the offence compoundable, so the parties can compromise at any stage and bring the proceedings to an end. Most section 138 matters are resolved this way rather than run to conviction.
Founder & CEO at VidhiSar. I have watched four companies pay for the same mistake, and it was never the mistake anyone expected. VidhiSar is software, not a law firm: every answer names the section it relies on so you can check it, and anything turning on your specific facts is worth putting to a professional. More about who builds this