Introduction-
Section 138 of the Negotiable Instruments Act was enacted to strengthen the credibility of commercial transactions and prevent the misuse of cheques. It provides a criminal remedy to a payee when a cheque issued for a lawful debt is dishonoured for “insufficient funds” or “exceeds arrangement”.
This article explains the entire pre-complaint procedure, the mandatory timelines, and the complete trial process, along with authentic Supreme Court judgments.
Essential Ingredients of the Offence
To constitute an offence under Section 138, the following conditions must be fulfilled:
- The cheque must be issued for a legally enforceable debt or liability.
- The cheque must be presented within its validity period.
- It must be returned unpaid by the bank.
- The payee must issue a written demand notice within 30 days of dishonour.
- The drawer must fail to make payment within 15 days of receiving the notice.
- The complaint must be filed within one month after the cause of action arises.
Landmark Judgment:
K. Bhaskaran v. Sankaran Vaidhyan Balan (1999) 7 SCC 510 – The Supreme Court explained the essential components of the offence and the importance of statutory timelines.
Step-by-Step Complete Procedure for Filing a Complaint
1. Presentation of the Cheque
The cheque must be presented within three months from the date written on it.
2. Dishonour of Cheque
The bank issues a return memo stating “Insufficient Funds”, “Payment Stopped”, “Signature Mismatch”, etc.
The legally recognised grounds are primarily insufficient funds and exceeding arrangement.
3. Collection of Bank Return Memo
The complainant must collect the physical/online return memo and preserve it for court proceedings
4. Issuance of Statutory Legal Notice
A written demand notice must be sent within 30 days of receiving the memo, demanding the cheque amount.
Supreme Court:
C.C. Alavi Haji v. Palapetty Muhammed (2007) 6 SCC 555 – Even if the drawer refuses to accept the notice, service is valid.
5. Mandatory Waiting Period of 15 Days
After receiving the notice, if the drawer does not pay within 15 days, the cause of action arises.
6. Filing the Complaint
The complaint must be filed within one month after the cause of action accrues.
If delayed, the court may condone the delay upon showing sufficient cause.
Filing of the Complaint under Section 138 for Complete Procedure for Filing a Complaint
Jurisdiction of the Court (Post-2015 Amendment)
Jurisdiction lies where:
- The payee maintains the bank account in which the cheque was presented, or
- The branch of the drawee bank where the drawer maintains his account (for stop-payment issues).
Supreme Court:
Bridgestone India Pvt. Ltd. v. Inderpal Singh (2016) 2 SCC 75 – Confirmed that the place of the payee’s bank determines jurisdiction.
Read More-
https://samvidhansesamadhaan.com/legal-demand-notice/Complaint Not Maintainable If Demand Notice Didn’t Mention Exact Cheque Amount- S.138 NI Act- Typo Error No Defence- Supreme Court
Documents Required-Complete Procedure for Filing a Complaint
- Original cheque
- Bank return memo
- Copy of legal notice
- Postal receipts/courier tracking
- Complaint affidavit
- Any supporting agreements or acknowledgements
Verification of Complainant (Affidavit)
Post the amendment in 2002, the complainant can give evidence through an affidavit, reducing court delay.
Filing Fees and Court Formalities
The court fee varies by State. The complaint is filed before the Judicial Magistrate First Class (JMFC) or Metropolitan Magistrate.
Trial Stages under Section 138-Complete Procedure for Filing a Complaint
Section 138 cases are to be tried as summary trials as per the Supreme Court directions.
Supreme Court:
Indian Bank Association v. Union of India (2014) 5 SCC 590 – Directed all Magistrates to adopt summary trial procedures to ensure speedy disposal.
Stage 1: Scrutiny and Cognisance
The Magistrate examines the complaint and affidavit. If satisfied, the court takes cognisance.
Stage 2: Issuance of Summons
A summons is issued to the accused. In many courts, summons is also sent via email/WhatsApp for efficiency.
Stage 3: First Appearance & Bail
The accused appears and is granted bail on furnishing a bond.
Stage 4: Framing of Notice (Section 251 CrPC / Section 262 BNSS)
The Magistrate explains the notice of accusation. The accused pleads guilty or claims trial.
Stage 5: Complainant’s Evidence (Affidavit-in-Chief)
The complainant files his affidavit and exhibits documents.
Stage 6: Cross-Examination of Complainant
The accused cross-examines the complainant on liability, source of funds, financial capacity, etc.
Supreme Court:
Rangappa v. Sri Mohan (2010) 11 SCC 441 – Held that there is a presumption in favour of the complainant under Sections 118 & 139, and the burden to rebut is on the accused.
Stage 7: Defence Evidence
The accused may lead evidence, including witnesses, bank statements, expert reports, etc. This stage is optional.
Stage 8: Final Arguments
Both sides present oral arguments summarising evidence and law.
Stage 9: Judgment
The Magistrate delivers judgment—conviction or acquittal.
Stage 10: Compensation, Fine & Sentence
On conviction, the accused may face:
- Imprisonment up to 2 years, or
- Fine up to twice the cheque amount, or
- Both.
Courts generally award compensation equal to the cheque amount under Section 357 CrPC.
Special Considerations in Section 138 Trials-Complete Procedure for Filing a Complaint
Summary Trial Mandate
Courts must try cheque cases summarily unless reasons are recorded for converting it into a regular trial.
Legal Presumptions
Sections 118 and 139 NI Act create a presumption of liability in favour of the holder of the cheque.
Rebuttal by Accused
The accused can rebut the presumption by showing:
- No debt existed
- The cheque was issued as security
- The cheque was stolen
- Signature obtained under pressure
Rebuttal is the preponderance of probabilities, not proof beyond a reasonable doubt.
Compounding of Offence
The offence can be compounded at any stage by mutual consent.
Supreme Court:
M/s Meters and Instruments Pvt. Ltd. v. Kanchan Mehta (2018) 1 SCC 560 – Encouraged compounding to reduce pendency.
Practical Tips for Complainants
- Maintain copies of all notices, receipts, and emails.
- Always comply with statutory timelines.
- Present the cheque within its validity period.
- Track summons service diligently.
Read also- Cheque Bounce Complaint Maintainable if Payment Not Made Within 15 Days of Notice- Delhi High Court Clarifies
Frequently Asked Questions (FAQs)
Q1. What is the time limit to file a complaint under Section 138?
Within one month from the date when the cause of action arises after the expiry of the 15-day notice period.
Q2. Can a cheque issued as security attract Section 138?
Yes, if on the date of presentation, a legally enforceable liability exists.
Q3. Is imprisonment mandatory in cheque bounce cases?
No, courts often impose compensation or a fine instead of imprisonment.
Q4. Can the accused settle the case after conviction?
Yes, the offence is compoundable at any stage, even before the High Court or Supreme Court.
Conclusion
Section 138 NI Act provides an effective legal remedy to ensure the credibility of financial transactions and protect the interests of genuine creditors. Understanding the Complete Procedure for filing a Complaint, the filing procedure, timelines, and trial stages helps complainants pursue their claims efficiently and increases the chances of successful recovery.
Adv. Sanjay Sharma is a Practicing Advocate in India, handling matters relating to Civil Law, Criminal Law, Goods and Services Tax (GST), and Insolvency & Bankruptcy laws.
Through Samvidhan Se Samadhaan, he works towards enhancing public legal awareness by presenting legal principles, procedures, and judicial decisions in clear, structured, and easily understandable language, supported by authoritative Supreme Court judgments.
