Cheque Bounce Legal Notice (Section 138)

The Section 138 timeline

Day 0: the bank dishonours the cheque and issues a return memo. From the date you receive this memo, you have 30 days to send a written demand notice to the drawer. The notice must demand payment of the cheque amount. After the notice is served, the drawer has 15 days to make the payment. If the drawer does not pay within those 15 days, you have one month from the expiry of that 15-day period to file a criminal complaint.

What makes a valid notice

The notice must be in writing, addressed to the drawer at their correct address, and must demand payment of the cheque amount. It should state the cheque number, date, amount, the bank's name, and the reason for dishonour as stated in the return memo. The notice should be sent by registered post with acknowledgement due (RPAD) or speed post, so you have proof of dispatch and delivery.

Grounds covered under Section 138

Section 138 covers cheques dishonoured for insufficiency of funds, account closed, exceeds arrangement, payment stopped by drawer, and 'refer to drawer'. It does not cover cheques that are stale (older than 3 months from the date on the cheque), post-dated cheques presented before the date, or cheques with material alterations.

What happens next

If the drawer pays within 15 days of receiving the notice, the matter ends. If not, you file a complaint under Section 138 before the Metropolitan Magistrate (in metropolitan areas) or the Judicial Magistrate First Class (elsewhere). The court where the cheque was presented for collection has jurisdiction. Section 139 creates a presumption that the cheque was received for discharge of a legally enforceable debt, shifting the burden to the drawer to prove otherwise.