Section 138 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Section 138 makes it an offence when a cheque given to discharge a debt or liability is returned unpaid because the account has too little money or the cheque exceeds the amount arranged with the bank. The offence is complete only if three conditions in the proviso are met, in order. If you are the payee and want a notice sent within the period, our recovery notice service can prepare it and keep the dates. This article follows the consolidated text of the Act consulted (position stated as from 26 December 2015).
A drawer whose cheque is returned unpaid for insufficient funds, or because it exceeds the arranged amount, is deemed to have committed an offence, punishable with imprisonment up to two years, or fine up to twice the amount of the cheque, or both. But the section applies only if (a) the cheque was presented within six months from its date or within its validity, whichever is earlier; (b) the payee or holder in due course gave written notice within thirty days of receiving the bank's information of return; and (c) the drawer failed to pay within fifteen days of receiving that notice.
What the section says
The opening part covers a cheque "drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability". If the bank returns it unpaid because the money standing to the credit of the account is insufficient to honour it, or because it exceeds the amount arranged to be paid from that account by an agreement with the bank, the drawer "shall be deemed to have committed an offence".
The punishment is stated as "imprisonment for a term which may be extended to two years, or with fine which may extend to twice the amount of the cheque, or with both". The words "without prejudice to any other provisions of this Act" mean the section sits alongside the rest of the Act. For example, the civil measure of compensation on dishonour is in section 117, which is separate from the fine under this section.
The three conditions in the proviso
The proviso says that nothing in section 138 applies unless all three of the following happen.
| Step | Who | What the proviso requires |
|---|---|---|
| (a) Presentment | Payee or holder | The cheque is presented to the bank within six months from the date on which it is drawn, or within the period of its validity, whichever is earlier |
| (b) Written notice | Payee or holder in due course | A demand for the said amount, by notice in writing to the drawer, within thirty days of receipt of information from the bank regarding the return of the cheque as unpaid |
| (c) Non-payment | Drawer | The drawer fails to pay the said amount to the payee or holder in due course within fifteen days of receipt of the notice |
Three points follow from the wording. The six months in (a) run from the date on which the cheque is drawn, and the period of validity is a separate limit; the text takes whichever is earlier, and it does not itself say how long a cheque stays valid. The thirty days in (b) run from receipt of the bank's information, not from the date of the cheque. The fifteen days in (c) run from receipt of the notice, so proof of receipt matters. Notice of dishonour generally is in sections 93 and 94; a drafted demand is in our section 138 demand notice draft.
The Explanation: "debt or other liability"
The Explanation says that for the purposes of the section, "debt or other liability" means "a legally enforceable debt or other liability". So a cheque given for something that is not a legally enforceable debt or liability is outside the section. The Act's presumption in favour of the holder is in section 139, read with the presumptions in section 118.
Work out your dates
The proviso uses three clocks that run one after another. Write down the date the cheque was drawn, the date it was presented, the date you received the bank's information of return, the date the written notice was given and the date the drawer received it. You can test your own dates with our cheque bounce notice calculator. The periods that count are those printed in the proviso above.
An example with invented names: Meera Traders draws a cheque in favour of Anil Supplies on 1 March, and Anil presents it on 20 March. The bank returns it unpaid and Anil receives the information on 25 March. Under proviso (b), Anil's written notice must be given within thirty days of 25 March. If Meera receives the notice on 10 April, then under proviso (c) the fifteen days run from 10 April.
What section 138 does not cover here
This article covers the offence itself. Related sections have their own posts: the plea that the drawer had no reason to believe the cheque would bounce (section 140); a company drawer (section 141); where to complain (section 142); the bank's slip as evidence (section 146); compounding (section 147); and interim compensation under section 143A. Several refer to the Code of Criminal Procedure, 1973 as printed; check current procedural law. Nothing later than the sources consulted is covered.
Common mistakes
- Counting the thirty days from the date of the cheque instead of from receipt of the bank's information of return (proviso (b)).
- Presenting the cheque after six months from its date, or after its validity ends, whichever is earlier (proviso (a)).
- Giving an oral demand; the proviso requires a notice in writing.
- Not recording each date as it happens, so that the periods have to be rebuilt from memory.
Need help with a returned cheque?
The proviso is strict about order and timing, so the notice and its proof of delivery matter. Our recovery notice service drafts the demand, tracks the thirty-day and fifteen-day periods and keeps the proof of service.
Key takeaways
- The offence needs an account cheque for a debt or liability, returned unpaid for insufficient funds or excess over the arranged amount.
- Punishment: up to two years, or fine up to twice the cheque amount, or both.
- Three conditions: presentment within six months or validity; written notice within thirty days; no payment within fifteen days of the notice.
- "Debt or other liability" means a legally enforceable debt or other liability.
Read next
- Section 139: presumption in favour of the holder
- Section 141: offences by companies
- Section 142: cognizance and jurisdiction
- Interim compensation under section 143A
Disclaimer: Based on the consolidated text of the Negotiable Instruments Act, 1881 consulted (stated as from 26 December 2015), as read on 2 October 2026. Later amendments, procedural law and court rules should be checked in their current form. This article is general information, not legal advice.