Cheque Bounce in India (2026): Section 138 Rules, Timelines, Penalties — for Both Sides
By the CreditSmart editorial team · September 2026
The 30-second version
A cheque that bounces for insufficient funds (or a closed/frozen account) against a legally enforceable debt is a criminal offence under Section 138 of the Negotiable Instruments Act — punishable with a fine up to twice the cheque amount or imprisonment up to two years, plus the bank’s bounce charges and a bruised banking record. The entire remedy runs on three strict clocks: 30 days to send the demand notice, 15 days for the drawer to pay, 1 month to file the complaint. Miss a clock and the criminal remedy weakens dramatically.
When a bounce becomes an offence (and when it doesn’t)
Section 138 needs all of these together:
- The cheque was for a legally enforceable debt or liability — loan repayment, invoice, rent. A gift cheque or purely security cheque (contested area) is weaker ground.
- Presented within its 3-month validity.
- Returned for insufficient funds / exceeds arrangement — and courts treat “account closed”, “payment stopped” and even “signature mismatch” used evasively as equivalent.
- The statutory notice-and-default sequence below was followed.
Not covered: technical bounces like a truly stale cheque, or post-dated cheques presented early. Those remain civil matters.
The receiver’s playbook — three strict clocks
- Collect the return memo from your bank (it states the bounce reason and date). You may re-present the cheque any number of times within validity — each fresh bounce restarts the clocks.
- Send a written demand notice within 30 days of the return memo — through a lawyer, by registered post/courier with proof, demanding the cheque amount within 15 days.
- Wait the 15 days. Payment in full ends the matter; the offence never crystallises.
- No payment? File the criminal complaint within 1 month of the 15-day window expiring, before the Magistrate where your bank branch (payee’s bank) is located. Attach cheque, memo, notice, delivery proof.
- Courts can order interim compensation up to 20% of the cheque amount during trial, and Section 138 cases are meant for summary trial — though real-world timelines run long. Parallel civil recovery remains open.
If YOUR cheque bounced — damage control
- Pay within the 15-day notice window. Full payment kills the criminal case before it exists — this is the single most valuable fact on this page.
- Genuine dispute about the debt? Reply to the notice through a lawyer within the same window putting your case on record.
- Repeated bounces get accounts flagged: banks levy ₹500–750+ per bounce, can withdraw cheque-book facilities, and lenders treat bounce history as a serious negative — EMI/NACH bounces also hit your credit score.
- Never issue “security” cheques casually — signed blank cheques handed to lenders and dealers are the source of half these cases.
EMI/auto-debit note: a bounced NACH mandate isn’t Section 138 (that needs a cheque), but a parallel provision (Section 25 of the Payment & Settlement Systems Act) criminalises dishonoured electronic-mandate payments similarly — plus bounce charges from both bank and lender, and a direct credit-report hit.
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FAQs
Can I go straight to police with a bounced cheque?
Section 138 runs through a Magistrate complaint after the notice sequence — not an FIR. (Cheating cases with fraudulent intent can separately ground an FIR under general criminal law.)
I missed the 30-day notice window. Is it over?
Re-present the cheque within its 3-month validity — a fresh bounce restarts the clocks. After validity, the criminal route closes but civil recovery (suit/summary suit) survives.
Does part-payment stop the case?
Only full payment of the cheque amount within the notice window prevents the offence; part-payments adjust the demand but don’t erase it.
Bounced cheque received — is the money taxable?
The underlying receipt keeps its own character (loan repayment, invoice etc.); the bounce itself has no tax effect. Compensation awarded by court follows its nature.
Related: NEFT vs RTGS vs IMPS · Late payment charges · Improve your CIBIL score
General information, not legal advice. Section 138 proceedings are technical and deadline-driven — engage a lawyer promptly.
Credit Smart India · IG: @creditsmart.in · FB/YT: @creditsmartindia · Last updated: September 2026
