A dishonoured cheque becomes an offence under Section 138 of the Negotiable Instruments Act, 1881 only if strict time limits are followed. Missing a date can defeat the complaint.
The timeline
- Presentation: within the validity of the cheque, which is three months from its date.
- Legal notice: in writing, within 30 days of receiving information of dishonour from the bank, demanding payment.
- Time to pay: the drawer has 15 days from receipt of the notice.
- Complaint: within one month after those 15 days expire. The court can condone delay for sufficient cause.
Which court
Under Section 142(2), the complaint is filed where the branch of the bank in which the payee maintains the account is situated, when the cheque is presented through an account.
During the case
The court may order the accused to pay interim compensation up to 20 per cent of the cheque amount under Section 143A. On appeal against conviction, the appellate court may require a deposit of at least 20 per cent of the fine or compensation under Section 148.
Punishment and settlement
The offence is punishable with imprisonment up to two years, or fine up to twice the cheque amount, or both. It is compoundable, and most cases end in settlement.
For the accused
Common defences include that the cheque was not issued for a legally enforceable debt, that the notice was not properly served, or that the complaint was filed out of time.
This article is general information on the law as it stood when written. It is not legal advice. Every service matter turns on its own service record, rules and orders, which should be examined before any step is taken.