Introduction

Dishonour of a cheque has become one of the most common financial disputes in India, and so the Procedure for Filing a Complaint under Section 138 NI Act, 1881 provides a legal remedy when a cheque issued towards repayment of a legally enforceable debt or liability is returned unpaid. The law is strict, and the procedure must be followed carefully; otherwise, the complaint may fail even before trial. This article explains every step of the process in a clear and practical way, supported by authentic Supreme Court of India judgments.

Essential Conditions & Procedure for Filing a Complaint under Section 138 NI Act

To initiate prosecution under Section 138, the following mandatory conditions must be fulfilled:

1. A cheque must be issued for a legally enforceable debt or liability.
   1. Indus Airways Pvt. Ltd. v. Magnum Aviation Pvt. Ltd., (2014) 12 SCC 539 – Cheques issued for advance payments without debt/liability do not attract Section 138.
2. The cheque must be presented within the validity period (currently 3 months).
3. Cheque must be returned unpaid for reasons such as “insufficient funds”, “account closed”, etc.
4. A legal notice must be issued within 30 days of receiving the bank return memo.
   1. K. Bhaskaran v. Sankaran Vaidhyan Balan, (1999) 7 SCC 510 – Notice within the statutory period is mandatory.
5. Drawer must fail to make payment within 15 days of receiving the notice.
6. A complaint must be filed within 30 days from the date the cause of action arises under Section 142 NI Act.

Step-by-Step Procedure for Filing a Complaint under Section 138 NI Act

Step 1 – Presenting the Cheque to the Bank

The payee must present the cheque to the bank before its expiry. The bank’s return memo showing the reason for dishonour is essential evidence.

Step 2 – Issuing the Statutory Demand Notice

A written demand notice must be sent to the drawer within 30 days from the date of the cheque return. The notice should clearly state:

• Cheque details
• Amount
• Reason for dishonour
• 15-day period for payment

Supreme Court:
Shakti Travel & Tours v. State of Bihar, (2002) 9 SCC 415 – Service of a valid demand notice is mandatory.

Step 3 – Completion of Cause of Action

If the drawer does not pay within 15 days from receiving the notice, the offence is deemed to have occurred. Only then can a criminal complaint be filed.

Step 4 – Deciding the Territorial Jurisdiction

The complaint may be filed where:

• The bank of the payee is situated (after 2015 amendment – Section 142(2)), or
• The payee maintains his account.

Supreme Court:
Dashrath Rupsingh Rathod v. State of Maharashtra, (2014) 9 SCC 129 – Jurisdiction lies where the drawee bank is located. (Later superseded by statutory amendment, but still relevant historically.)

Step 5 – Drafting and Filing the Complaint Before Magistrate

The complaint must include:

• Description of the transaction
• Cheque details
• Bank memo
• Copy of legal notice
• Proof of service
• Statement that payment was not made
• Verification/Affidavit

Supreme Court:
National Small Industries Corporation Ltd. v. State (NCT of Delhi), (2009) 1 SCC 407 – Complaint by authorized representative of a company is valid.

Step 6 – Pre-Summoning Evidence / Affidavit

Under Section 145 NI Act, evidence may be given by affidavit.

Supreme Court:
A.C. Narayanan v. State of Maharashtra, (2014) 11 SCC 790 – Affidavit evidence by an authorized representative is permissible.

Step 7 – Summoning the Accused

If the Magistrate finds a prima facie case, a summons is issued to the accused.

Step 8 – Summary Trial and Evidence Stage

Proceedings under Section 138 are to be tried summarily under Section 143 NI Act.

Supreme Court:
Meters and Instruments Pvt. Ltd. v. Kanchan Mehta, (2018) 1 SCC 560 – Emphasis on speedy, summary trial; encourages compounding.

Step 9 – Final Arguments and Judgment

If guilt is proved, punishment can be:

• Imprisonment up to 2 years, or
• Fine up to twice the cheque amount, or
• Both
  The court may also order compensation under Section 357 CrPC.

Practical Tips for Lawyers and Litigants-Procedure for Filing a Complaint under Section 138 NI Act

• Always keep the original cheque, return memo, and postal receipts safely.
• Ensure legal notice is drafted very carefully — even small defects can cause dismissal.
• Avoid delay after the cause of action arises; limitation is strictly followed.
• Where the payee is a company or firm, always attach the authorization letter/board resolution.
• Consider compounding early to save time and cost.
• Maintain strict compliance with timelines — courts do not condone procedural lapses in Section 138 matters.

Common Mistakes That Lead to Dismissal of Section 138 Cases

• Notice not issued within 30 days
• Wrong jurisdiction
• Payee/company not properly authorized
• Failure to prove service of notice
• Complaint filed beyond the limitation

Read also-

Cheque Bounce Complaint Maintainable if Payment Not Made Within 15 Days of Notice- Delhi High Court Clarifies

Conclusion

A cheque bounce complaint under Section 138 requires strict compliance with statutory timelines and the Procedure for filing a Complaint under Section 138 NI Act. The remedy is powerful, but success depends on precision—particularly regarding the notice, cause of action, jurisdiction, and evidence. Supreme Court judgments repeatedly emphasize that while Section 138 aims to promote financial discipline, the process must remain fair, timely, and legally accurate. For lawyers and litigants, following this structured procedure increases the chances of a successful prosecution while protecting the credibility of cheque transactions in India.

FAQs

Q1. What is the time limit for issuing the legal notice?
Within 30 days of receiving the cheque return memo.

Q2. Can I file an FIR for a cheque bounce?
No. Only a complaint before the Magistrate is permissible under Section 142 NI Act.

Q3. What if the cheque was issued for an advance payment?
Section 138 does not apply. (See Indus Airways Pvt. Ltd., supra)

Q4. What is the maximum punishment?
Up to 2 years imprisonment or a fine of up to twice the cheque amount.

Q5. Can the case be settled after filing?
Yes. Compounding at any stage is permitted and strongly encouraged by the Supreme Court.