Table of contents

1. Frequently asked questions

2. Draft

Frequently asked questions

  1. What is Section 138 of the Negotiable Instruments Act, 1881?
    Answer: Section 138 deals with the dishonor of cheques due to insufficient funds or other reasons. It makes bouncing of cheques a criminal offense if the drawer fails to make the payment within 15 days of receiving the legal notice.

  2. What are the essential conditions for filing a case under Section 138?
    Answer: The following conditions must be met:
    • The cheque was issued for a legally enforceable debt or liability.

    • It was presented to the bank within its validity period (usually 3 months).

    • It was dishonored due to insufficient funds or other valid reasons.

    • A legal notice was sent within 30 days of receiving the dishonor memo.

    • The drawer failed to make payment within 15 days from receipt of the notice.

  3. What is the penalty for dishonoring a cheque under Section 138?
    Answer: The penalty may include:
    • Imprisonment for up to two years and/or

    • Fine up to twice the cheque amount or both, as decided by the court.

  4. Can a case be filed if the cheque was given as a gift or loan security?
    Answer: No, a case under Section 138 can only be filed if the cheque was issued against a legally enforceable debt or liability. Cheques issued as gifts, donations, or security deposits do not qualify.

  5. What happens if the drawer does not respond to the legal notice?
    Answer: If the drawer fails to pay within 15 days, the payee can file a criminal complaint in the appropriate magistrate court within 30 days after the expiry of the notice period.

  6. Can a case under Section 138 be settled out of court?
    Answer: Yes, both parties can mutually settle the matter at any stage before the court passes its final judgment. If settled, the court may close the case upon payment of the cheque amount.

  7. Can a complaint be filed against a company or its directors for a bounced cheque?
    Answer: Yes, if the cheque was issued by a company, a complaint can be filed against both the company and its responsible officers (e.g., directors, managing director, authorized signatory). However, only those in charge of the company's day-to-day operations can be held liable.

  8. Can multiple cases be filed for multiple bounced cheques?
    Answer: Yes, if multiple cheques from the same drawer have bounced, separate cases can be filed for each cheque. However, the complainant may consolidate them for easier legal proceedings.

  9. What if the cheque is post-dated? Can Section 138 still apply?
    Answer: Yes, post-dated cheques can also attract action under Section 138, provided they are issued for a legally enforceable debt and get dishonored after being presented for payment.

  10. Is there any time limit to file a case after the cheque bounces?
    Answer: Yes, strict timelines must be followed:
    • The legal notice must be sent within 30 days of receiving the dishonor memo.

    • The drawer has 15 days to make the payment after receiving the notice.

    • If the payment is not made, the complainant

Draft

NOTICE UNDER SECTION 138 OF THE NEGOTIABLE INSTRUMENTS ACT, 1881

REGD A/D / U.P.C

Date: 15/02/2025

To,
Mr. Rajesh Mehta
202, Green Residency,
MG Road, Andheri East,
Mumbai, Maharashtra - 400069

Subject: Legal Notice under Section 138 of the Negotiable Instruments Act, 1881 for Dishonor of Cheque

Dear Sir,

I, Adv. _______, Advocate, under instructions from and on behalf of my client, Mr. Anil Sharma, residing at Flat No. 15, Sunrise Apartments, Bandra West, Mumbai, Maharashtra - 400050, hereby serve upon you the following legal notice under Section 138 of the Negotiable Instruments Act, 1881:

  1. That my client and you had financial dealings, and in discharge of your legally enforceable liability, you issued a cheque bearing No. 456789, dated 10/01/2025, drawn on HDFC Bank, Andheri East Branch, for an amount of Rs. 2,50,000/- (Rupees Two Lakh Fifty Thousand Only) in favor of my client.

  2. That my client presented the said cheque for encashment through their bank, State Bank of India, Bandra West Branch, on 15/01/2025. However, the said cheque was returned dishonored by your bank with the reason "Insufficient Funds" vide return memo dated 17/01/2025.

  3. That upon receiving intimation of dishonor, my client immediately informed you of the same and requested you to make the necessary payment. However, despite repeated requests and reminders, you have failed to make the payment of the cheque amount.

  4. That your failure to make payment of the dishonored cheque within the statutory period constitutes an offense under Section 138 of the Negotiable Instruments Act, 1881.

  5. In view of the above, I hereby call upon you to make the payment of Rs. 2,50,000/- (Rupees Two Lakh Fifty Thousand Only) to my client within 15 (fifteen) days from the date of receipt of this notice, failing which my client shall be constrained to initiate legal proceedings against you under Section 138 of the Negotiable Instruments Act, 1881, which may result in imprisonment, fine, or both.

  6. Please consider this as a final intimation before legal action. If the payment is made within the stipulated time, no further legal action will be taken.

  7. You are hereby advised to treat this notice with utmost urgency to avoid further legal complications.

A copy of this notice is retained in my office for future reference.

Yours faithfully,
Adv. _______
Phone:
Email: