A dishonoured cheque given for a debt or liability can lead to a criminal complaint under s.138 of the Negotiable Instruments Act, 1881. The law is strict about timelines.
The sequence
- Present the cheque within its validity — currently three months from its date.
- Receive the return memo from the bank stating the reason for dishonour (for example, “funds insufficient”).
- Send a legal demand notice within 30 days of receiving information of dishonour.
- The drawer has 15 days from receiving the notice to pay.
- File the complaint within one month after those 15 days expire, before the court having jurisdiction.
Punishment and interim compensation
The offence is punishable with imprisonment up to two years, or a fine up to twice the cheque amount, or both. The court can also direct the accused to pay interim compensation of up to 20% of the cheque amount (s.143A).
Tips
- Keep the original cheque, return memo, notice and postal receipts safe.
- The notice must demand the cheque amount — get its wording right.
- If you are the drawer, respond to the notice; there may be defences, and settlement is often possible.
