Business Laws · The Negotiable Instruments Act, 1881

Dishonour of Cheque under Sections 138 to 142 (CA Foundation Business Laws)

Updated 4 October 2026 · Fact-checked

Section 138 of the Negotiable Instruments Act, 1881 makes it an offence if a cheque given to discharge a legally enforceable debt is returned unpaid for insufficient funds. To solve a question, check the cheque, the six-month presentation, the 30-day notice, the 15-day payment window and the one-month complaint. Then state the penalty.

Understand Dishonour of Cheque under Sections 138 to 142

A cheque is a promise that your bank will pay money from your account. If you issue a cheque and the bank returns it because your account does not have enough money, the payee is cheated of that promise. Section 138 treats this as a criminal offence, not just a civil dispute.

The section applies only when certain things are true. The cheque must be drawn on an account the drawer maintains with a banker. It must be for payment of money to another person from that account. It must be given to discharge, wholly or partly, a debt or other liability. The Explanation says this means a legally enforceable debt or liability. A cheque given as a gift or for a time-barred or illegal debt does not attract the section.

The cheque must be returned unpaid for one of two reasons: the money in the account is insufficient, or the amount exceeds the amount arranged to be paid from that account by an agreement with the bank (for example, an overdraft limit). Other reasons for return, such as a signature mismatch, are not covered by the wording of the section.

Even then, the drawer is not prosecuted straight away. The proviso gives a three-step safety net. The cheque must be presented within six months of its date or within its validity, whichever is earlier. The payee must send a written demand notice within 30 days of getting the bank's information about the dishonour. The drawer then has 15 days from receiving the notice to pay. Only if the drawer fails to pay does the offence become complete.

After that, the payee files a written complaint within one month (Section 142). The court may punish the drawer with imprisonment up to two years, or fine up to twice the cheque amount, or both. Sections 143A and 148 add interim compensation and appeal deposits, so the payee gets some money early.

Key rules to remember

Essentials of Section 138: Cheque on own account + for a legally enforceable debt/liability + returned unpaid for insufficient funds or exceeding arrangement; All must be present. Missing any one means no offence under Section 138.
Presentation time (proviso (a)): Within 6 months from the date of the cheque, or within its validity period, whichever is earlier; A cheque dated 1 June presented after 1 December is out of time.
Demand notice (proviso (b)): Written notice to the drawer within 30 days of receiving information from the bank about the return; The 30 days run from the payee's receipt of bank information, not from the cheque date. Notice must be in writing.
Drawer's payment window (proviso (c)): Drawer must pay within 15 days of receiving the notice; The offence is complete only if the drawer fails to pay within these 15 days.
Complaint timeline (Section 142(1)(b)): Complaint in writing within 1 month of the date the cause of action arises under proviso (c); Court may take cognizance later if the complainant shows sufficient cause for the delay.
Who can complain and who can try: Complaint by payee or holder in due course; tried by Metropolitan Magistrate or Judicial Magistrate of the first class (Section 142(1)); No court lower than these can try the offence.
Punishment (Section 138): Imprisonment up to 2 years, or fine up to twice the cheque amount, or both; Say 'may extend to'. These are maximums.
Interim compensation (Section 143A): Up to 20% of the cheque amount; payable within 60 days (extendable by up to 30 days for sufficient cause); Court may order it when the drawer pleads not guilty (summary trial or summons case), or on framing of charge in other cases.
Appeal deposit (Section 148): Appellate Court may order a minimum of 20% of the fine or compensation awarded by the trial Court, in addition to any interim compensation; Payable within 60 days (extendable by up to 30 days). Applies in the drawer's appeal against conviction.
Jurisdiction (Section 142(2)): Cheque delivered for collection through an account: court where payee's account branch is situated. Otherwise presented for payment: court where the drawer's drawee bank branch is situated; Section 142A deals with transfer of pending cases and subsequent complaints against the same drawer.

How to solve Dishonour of Cheque under Sections 138 to 142 questions

Use this checklist for any case study on cheque dishonour. Write the answer in the provision, facts, conclusion order.

1Identify the cheque: drawn on the drawer's own account, in favour of another person, and for what purpose.
2Check the liability: is it a legally enforceable debt or liability? A gift or an illegal or unenforceable debt fails here.
3Check the reason for return: insufficient funds or amount exceeding the arrangement with the bank? Other reasons are outside the wording of Section 138.
4Check presentation: was the cheque presented within six months of its date or within its validity, whichever is earlier?
5Check the notice: was a written demand made within 30 days of receiving the bank's information about the return?
6Check the 15 days: did the drawer fail to pay within 15 days of receiving the notice? Count from receipt.
7Check the complaint: was a written complaint made by the payee or holder in due course within one month after that 15-day period ended, to a competent court?
8Conclude clearly: offence made out or not, and state the punishment (up to two years, or fine up to twice the amount, or both).

Quickest way: The 6-30-15-1 date check

When to use it: Use it when a case study gives many dates and asks whether the drawer can be prosecuted.

Write 6 months, 30 days, 15 days, 1 month in the margin.
Mark each date from the facts against these four limits in order.
Stop at the first failed limit. That is your reason the offence is not made out.
Before the dates, do a quick scan of the debt and the reason for return. They fail cases too.
Write the answer in three lines: rule, facts applied, conclusion. Add the penalty if the offence is made out.

Common mistakes in Dishonour of Cheque under Sections 138 to 142

Counting the 30-day notice period from the date of the cheque.
Students mix it with the six-month presentation rule, which does run from the cheque date.
Fix: The 30 days run from the payee's receipt of information from the bank about the return. The six months run from the cheque date.
Saying the drawer is prosecuted as soon as the cheque bounces.
Students forget the proviso conditions.
Fix: Dishonour alone is not enough. The notice must be given and the drawer must fail to pay within 15 days of receiving it.
Applying Section 138 to every kind of bounced cheque, including a cheque given as a gift or for a barred debt.
Students focus on the bounce and ignore the debt requirement.
Fix: Always check that the cheque was for a legally enforceable debt or liability.
Writing the punishment as a fixed two years or fixed double fine.
Students memorise the numbers but not the wording.
Fix: Write: imprisonment which may extend to two years, or fine which may extend to twice the cheque amount, or both.
Treating the one-month complaint limit as starting from the date of dishonour.
Students skip the 15-day window.
Fix: The cause of action arises when the drawer fails to pay within 15 days of the notice. The one month runs from then. A late complaint can still be taken if the complainant shows sufficient cause.
Believing the drawer can escape by saying he did not expect the cheque to bounce.
Students assume intention is needed in a criminal offence.
Fix: Section 140 says it is no defence that the drawer had no reason to believe the cheque might be dishonoured for the reasons stated in Section 138.

Worked examples

Example 1

Ravi issued a cheque for ₹2,00,000 dated 1 March to Meena to repay a loan she had given him. Meena presented it on 20 March. The bank returned it on 21 March for insufficient funds, and Meena received the bank's memo on 22 March. She sent a written notice to Ravi on 10 April, which he received on 12 April. Ravi paid nothing. Can Meena prosecute Ravi under Section 138? What is the maximum penalty?

Show the solution

Provision: Section 138 applies where a cheque for a legally enforceable debt is returned for insufficient funds, and the conditions of the proviso are met.
Cheque and debt: the cheque was drawn on Ravi's account to repay a loan, which is a legally enforceable debt. It was returned for insufficient funds.
Presentation: dated 1 March, presented 20 March. This is within six months.
Notice: Meena received bank information on 22 March and sent written notice on 10 April. That is within 30 days (19 days).
Payment window: Ravi received the notice on 12 April. The 15 days end on 27 April. He did not pay, so the offence is complete.
Complaint: Meena must file a written complaint within one month from the date the cause of action arises, that is, after 27 April. The facts give no problem here, so she can proceed.
Penalty: imprisonment up to two years, or fine up to twice ₹2,00,000, which is ₹4,00,000, or both.

Answer: Yes. All conditions are met. Ravi may be punished with imprisonment up to two years, or fine up to ₹4,00,000, or both.

Example 2

Anil gave Sunita a cheque dated 5 January for ₹50,000 for a debt. Sunita presented it on 20 July, and it was returned for insufficient funds. Sunita immediately sent a written notice. Anil did not pay. Sunita wants to file a case under Section 138. Advise her.

Show the solution

Provision: under proviso (a) to Section 138, the cheque must be presented within six months from the date it is drawn, or within its validity period, whichever is earlier.
Facts: the cheque is dated 5 January. Six months end on 5 July.
Application: Sunita presented the cheque on 20 July, after the six months ended. The cheque was not presented within the required period.
Effect: since a condition of the proviso is not met, Section 138 does not apply, even though notice was sent and Anil did not pay.
Remedy: Sunita cannot prosecute under Section 138. She may still recover the debt through a civil suit, as the debt itself remains.

Answer: Sunita cannot succeed under Section 138 because the cheque was presented after six months from its date. She may pursue a civil remedy for the debt.

Exam tips

In case studies, tick the conditions in order: debt, reason for return, presentation, notice, 15 days, complaint. Show each tick in your answer for step marks.
Always write the time limits with their starting point: six months from the cheque date, 30 days from bank information, 15 days from receipt of notice, one month from the cause of action.
Quote the punishment as maximums: up to two years, or fine up to twice the cheque amount, or both.
Mention Section 140 if the drawer argues he did not expect dishonour, and Section 143A or 148 if the question talks about interim compensation or appeals.
Write short answers in three parts: provision, facts, conclusion. A one-line conclusion such as 'Offence under Section 138 is made out' earns marks.

Practice questions from The Negotiable Instruments Act, 1881

Dishonour of Cheque under Sections 138 to 142: frequently asked questions

What is the notice period for a cheque bounce case under Section 138?

The payee must send a written demand notice within 30 days of receiving information from the bank that the cheque was returned unpaid. The drawer then gets 15 days from receiving the notice to pay.

What is the time limit to file a cheque bounce complaint?

The complaint must be made in writing within one month of the date the cause of action arises, which is when the drawer fails to pay within 15 days of the notice. Under Section 142, the court may accept a late complaint if the complainant shows sufficient cause.

What is the punishment under Section 138?

The drawer may be punished with imprisonment up to two years, or with fine up to twice the cheque amount, or with both. These are maximum limits, and the court decides the actual sentence.

Does Section 138 apply if the cheque bounces because of a signature mismatch?

The wording of Section 138 covers return for insufficient funds or for the amount exceeding the arrangement with the bank. A return for another reason does not fit that wording. In exams, apply the section to these two reasons.

Which court can try a Section 138 case?

The court must be no lower than a Metropolitan Magistrate or a Judicial Magistrate of the first class. Under Section 142(2), the place depends on where the payee's account branch is, if the cheque was delivered through an account, or where the drawer's bank branch is, if presented otherwise.