On this page
- What is a Section 138 notice?
- What to verify before drafting the notice
- 1. The cheque itself
- 2. The bank memo
- 3. The underlying transaction
- 4. The signatory’s identity
- Drafting the notice — what must be included
- How the notice should be sent
- What if you’re on the receiving end of a Section 138 notice?
- Option 1 — Pay within 15 days
- Option 2 — Reply disputing the liability
- Option 3 — Negotiate a settlement
- Typical timeline of a Section 138 matter
- How MMLC helps
- Frequently asked questions
If you’ve received a Section 138 cheque bounce notice — or you’re about to send one — the next 30 days will largely decide how this matter ends. This guide walks through exactly what to verify, what to reply, and the realistic outcomes ahead. It’s general information and does not replace matter-specific legal advice.
What is a Section 138 notice?
Section 138 of the Negotiable Instruments Act, 1881, makes it a criminal offence to issue a cheque that bounces — when the issuer either doesn’t have sufficient funds or has crossed an exceeded-arrangement limit with their bank. But before the matter becomes criminal, the law requires a structured demand notice.
The Section 138 process has three rigid steps:
- Bank returns the cheque — usually marked “insufficient funds” or “exceeds arrangement”. You get a memo.
- You issue a demand notice within 30 days of the bank memo. Miss this window and the criminal route under Section 138 closes permanently.
- If the cheque issuer doesn’t pay within 15 days of receiving the notice, you may file a criminal complaint within the next 30 days.
Section 138 is a single-window opportunity. The dates on your bank memo, your notice dispatch receipt, and your complaint filing matter more than any other detail in this matter.
What to verify before drafting the notice
A weak notice gives the cheque issuer ammunition to escape. Before drafting, you need clean evidence on the following:
1. The cheque itself
The cheque must be drawn on a bank account for the discharge of a legally enforceable debt. Cheques given as security, gift, or post-dated cheques for non-existent debts often fail the Section 138 test. Keep the original cheque safe — you’ll need to produce it.
2. The bank memo
You need the original bank return memo with the reason for dishonour. “Insufficient funds”, “exceeds arrangement”, “account closed”, or “stop payment” all qualify. The 30-day window starts from the date you received this memo — not the date the cheque was deposited.
3. The underlying transaction
What was the cheque issued for? Was there a contract, an invoice, a loan agreement, a settlement? You’ll need to produce evidence of the underlying liability when the matter is heard. WhatsApp messages, emails, invoices, and ledgers all help.
4. The signatory’s identity
Confirm the legal name and current address of the person who signed the cheque. If the cheque is from a company, the directors who were “in charge of and responsible for the conduct of the business” at the time of dishonour can also be made parties.
Drafting the notice — what must be included
A Section 138 notice has a tight structural requirement. Missing any of these can render the notice ineffective:
| Element | What it does |
|---|---|
| Drawer and drawee details | Full names, addresses, account information. Errors here are routinely used to get a notice quashed. |
| Cheque details | Number, date, amount, drawee bank, branch. Should match the cheque exactly. |
| Bank memo reference | Date and reason for dishonour, citing the memo verbatim. |
| Underlying liability | What was owed and why. Reference any contract, invoice, or transaction. |
| Demand for payment | Clear demand for the cheque amount, payable within 15 days of receipt. |
| Consequence stated | Explicit reference to Section 138 and the right to file a complaint if unpaid. |
How the notice should be sent
Always send via Registered Post with Acknowledgment Due (RPAD). You may additionally send by speed post and email, but RPAD is the gold standard for proof of service. Keep the dispatch receipts safe — they’re decisive when the matter goes to court.
What if you’re on the receiving end of a Section 138 notice?
If you’re the cheque issuer and you’ve received a Section 138 notice, your response strategy depends on whether the underlying liability is real, disputed, or settled. The 15-day reply window is short — don’t let it pass without action.
Option 1 — Pay within 15 days
The cleanest exit. If the liability is real and you have the funds, paying within 15 days closes the Section 138 route. Get a written acknowledgment of payment and a no-due statement so the matter cannot be reopened.
Option 2 — Reply disputing the liability
If the cheque was issued under coercion, given as security only, was post-dated for a non-existent debt, or the underlying transaction is disputed — a properly drafted reply puts your defence on record before any complaint is filed. The reply matters because it becomes part of the evidence trail.
Option 3 — Negotiate a settlement
Many Section 138 matters are resolved by structured settlement. The complainant gets faster recovery; the accused avoids criminal exposure. Settlements can happen even after a complaint is filed, but they’re cheaper and faster earlier.
Typical timeline of a Section 138 matter
Once a complaint is filed, the matter moves through the Magistrate’s court. Indian Section 138 trials typically run 18–36 months, though the Supreme Court has repeatedly directed that they be concluded within six months — reality varies by jurisdiction.
The criminal nature of the offence means imprisonment of up to two years and / or a fine of up to twice the cheque amount are possible outcomes. In practice, most matters settle before sentencing.
How MMLC helps
MMLC drafts Section 138 notices and replies within the 30-day and 15-day windows respectively. We coordinate the suitable independent advocate when the matter needs to be filed in court. Every engagement starts with a written scope and fee — no surprise billing.
If you’re holding a bounced cheque or you’ve just received a Section 138 notice, send the matter through the form on this page. We’ll respond with the realistic options before any clock runs out.
Frequently asked questions
What is the deadline to send a Section 138 notice?
30 days from the date you received the bank memo dishonouring the cheque — not the date the cheque was deposited. Missing this window permanently closes the criminal route under Section 138, though civil recovery may still be possible.
Does the cheque issuer have 15 days to pay or to reply?
15 days to pay the cheque amount in full. A reply alone — without payment — doesn’t stop the complaint window from opening on day 16. If liability is disputed, the reply is still important because it puts the defence on record.
Can a Section 138 complaint be filed against a company’s director?
Yes — directors who were “in charge of and responsible for the conduct of the business” at the time the cheque was issued can be made parties. Independent or non-executive directors who can show they weren’t involved in the relevant conduct have a statutory defence.
What happens if the cheque was issued only as security?
Cheques given as security for a future contingent liability — and not for a presently enforceable debt — have been held to fall outside Section 138 in several cases. The factual matrix matters; the defence works when the security character is clearly documented in the underlying transaction.
Can a Section 138 matter be settled after the complaint is filed?
Yes. Compounding is permitted under Section 147 of the NI Act, with the Court’s permission and on payment of compounding costs. Earlier settlements attract lower costs; settlements at later stages may require costs of 15–20% of the cheque amount.
Is a Section 138 notice sent by email valid?
The High Courts have taken differing views. The safest practice is Registered Post with Acknowledgment Due — supplementary email is fine but should not be the only mode of service. Keep all dispatch receipts.