For a bounced cheque you can take two kinds of legal action, and they can run together. The first is a criminal complaint under Section 138 of the Negotiable Instruments Act 1881, where the dishonour of a cheque for insufficiency of funds is an offence punishable with imprisonment up to two years, or a fine up to twice the cheque amount, or both. The second is a civil suit to recover the cheque amount as a debt. Both depend on a notice of demand served on the drawer, and both are governed by short limitation periods that start running from the date of dishonour.
The criminal route: a Section 138 complaint
Section 138 covers a cheque drawn for the discharge of a debt or other liability that is returned unpaid either because of insufficiency of funds in the account or because the amount exceeds the arrangement with the bank. The offence is not complete on the day of dishonour. It becomes complete only when the drawer fails to pay within fifteen days of receiving a valid notice of demand from the payee.
The steps are precise. The cheque must have been presented within its validity, which is normally three months from the date written on it. The notice must be given within thirty days of the payee receiving the bank's memo of dishonour. The drawer then has fifteen days from receipt of the notice to pay. If he does not, the cause of action arises on the day that fifteen-day period ends, and the complaint must be filed within one month of that day. Section 142 of the Act allows the court to condone delay in filing the complaint if the complainant shows sufficient cause.
Only the payee or holder in due course may file the complaint. If the cheque was issued by a company, Section 141 makes the company and the persons who were in charge of, and responsible to, the company for the conduct of its business at the time of the offence liable along with it, provided the offence was committed with their consent or connivance, or was attributable to their neglect.
How the complaint is tried
Section 143 of the Act provides for summary trial, so these matters move faster than ordinary criminal cases. The trial is by a Judicial Magistrate. The venue is fixed by Section 142(2): the complaint is tried by a court within whose jurisdiction the branch of the bank where the payee maintains the account is situated. For most payees in Kolkata that means the complaint is filed locally, and across the districts it is filed at the court having jurisdiction over the relevant bank branch.
Two provisions give the payee an early financial foothold. Section 143A, inserted in 2018, allows the court during the trial to direct the drawer to pay interim compensation of up to twenty per cent of the cheque amount, and a further amount if the drawer is convicted. Section 148 requires a person convicted under Section 138 to deposit a minimum of twenty per cent of the fine or compensation awarded by the trial court before an appeal can be entertained, subject to the court's discretion to relax it.
The civil route: recovering the money
Dishonour does not extinguish the underlying debt, and the payee is not restricted to the criminal case. A civil suit for recovery of the amount due can be filed within three years of the date the cause of action arose. Where the claim arises from a written contract, or where the cheque itself supports the claim as a negotiable instrument, a summary suit may be available; in that procedure the defendant must obtain leave of the court to defend, which shifts the burden of showing a triable issue onto the drawer. The suit is tried under the Code of Civil Procedure 1908, which was not changed by the criminal-law reforms of 1 July 2024.
Filing both a complaint and a suit is permissible, and the two do different jobs. The complaint is aimed at the offence and the punishment or compensation that follows; the suit is aimed at a decree that can be executed against the drawer's property or assets. In many matters the payee files the complaint first, because the deadlines are tighter, and keeps the civil suit in reserve for the balance.
Settlement, compounding and when the case ends
The offence under Section 138 is compoundable under Section 147 of the Act, so the parties can settle the matter at any stage, including after conviction, and the proceedings then come to an end on the terms recorded. In practice a large share of cheque cases close with payment, because the drawer has a strong incentive to avoid the sentence and the deposit required for an appeal. A settlement should be recorded before the court or in writing with clear terms, so that there is no dispute later about what was paid and what was given up.
If the drawer still does not pay after conviction, the sentence and fine can be enforced, and the civil decree, if one has been obtained, can be executed. Aggravated recovery steps against property become relevant at that stage.
Step by step: what a payee should do
- Preserve the original cheque and the bank's return memo, and note the exact reason of dishonour recorded on it.
- If the dishonour is for want of funds or because the cheque exceeded the arrangement, prepare and despatch a notice of demand within thirty days of receiving the memo, by registered post or speed post with acknowledgement due.
- Wait the full fifteen days. If the drawer pays, the matter ends; keep the receipt and the paid instrument.
- If payment does not come, file the Section 138 complaint within one month of the cause of action before the Magistrate having jurisdiction over the relevant bank branch.
- In parallel or soon after, evaluate a civil suit for recovery within the three-year limitation, particularly if the claim exceeds the amount the criminal court is likely to award as compensation.
- Preserve all correspondence; offers to pay part of the amount can matter both to compounding and to the civil claim.
What sort of dishonour supports the complaint
Section 138 speaks of dishonour for insufficiency of funds or because the amount exceeds the arrangement with the bank. Dishonour for a reason outside these grounds, for example a mismatch of signature or a materially altered cheque, does not by itself fall within the section, though the civil claim survives. Where a drawer stops payment or closes the account, courts have generally read the dishonour as covered where the real reason is that funds were not available, so the return memo and the bank's endorsement matter a great deal. How the memo reads often decides whether the criminal route is open at all.
| Remedy | What it achieves | Key deadline |
|---|---|---|
| Complaint under Section 138, NI Act 1881 | Punishment of the drawer, compensation and interim compensation | Notice within 30 days of the return memo; complaint within 1 month of the cause of action |
| Civil suit for recovery | A decree for the money, executable against property | Within 3 years of the cause of action |
| Interim compensation under Section 143A | Up to 20 per cent of the cheque amount during trial | Applied for during the Section 138 proceedings |
| Compounding under Section 147 | Ends the criminal case on agreed terms | Possible at any stage |
Where to file in Kolkata and West Bengal
Criminal complaints under Section 138 are filed before the Judicial Magistrate having jurisdiction over the bank branch where the payee's account is maintained, so a Kolkata payee whose collecting branch is in the city files locally. In the districts the complaint goes before the court having jurisdiction over the relevant branch. Civil suits for recovery follow the ordinary rules of jurisdiction, and where the amount is within limits they may be filed before the City Civil Court at Kolkata or the appropriate civil judge in the districts. The old police-station route is not the way to enforce a cheque: this is a Magistrate-tried complaint, instituted by the payee and not by the police.
If you are weighing the two routes, it helps to keep the papers together: the original cheque, the return memo, the notice and its postal proof, and the invoice or agreement that explains why the cheque was given. Our note on how to draft the notice covers the first step in detail, and a consultation can settle which route fits your claim.