Cheque Bounce Notice Received: What to Do Within 15 Days

Receiving a legal notice saying that a cheque you issued has bounced, and demanding payment within fifteen days, is alarming. It is the first step of a criminal case under Section 138 of the Negotiable Instruments Act, 1881. Many people ignore it, assuming it is only a letter. That is a mistake. The fifteen days are your best chance to prevent a complaint, and what you say in reply can matter later.

What Does the Notice Mean?

The payee has informed you, within thirty days of learning that the cheque was dishonoured, that the cheque was returned for insufficient funds or because it exceeded the arrangement with the bank, and has demanded the amount. You have fifteen days from receiving the notice to make the payment. If you pay in time, no offence is committed under Section 138. If you do not, the payee can file a complaint within one month after the fifteen days end.

What Are Your Options?

Within the fifteen days, you can

• Pay the amount, if it is genuinely due, and get a written receipt or acknowledgement
• Negotiate a settlement and have it recorded in writing
• Send a reply disputing the claim, with reasons
• Do nothing, which leaves the complaint open and loses the chance to put your case on record

Which of these is right depends on whether you owe the money. If you owe it and can pay, paying removes the criminal exposure. If you do not owe it, you should reply properly.

How Should You Reply?

Send a written reply by registered post and email, through an advocate if possible, within the fifteen days. Respond to the specific points in the notice. State clearly what is disputed and why, for example that there was no debt, that the debt was paid, that the cheque was given only as security, or that the amount in the cheque is different from what was owed. Do not make admissions you do not mean, and do not abuse or threaten the sender. A reply that raises a clear defence early looks more credible than one raised for the first time at trial.

What Defences May Be Available?

Common defences include

• There was no legally enforceable debt or liability at the time
• The debt was already paid or settled, or the cheque was returned and then misused
• The cheque was given as security and nothing had become due
• The amount filled in is different from the amount agreed
• The notice was not sent in time or was defective, or the cheque was presented after its validity
• The debt is time-barred and not acknowledged in writing

For the security-cheque defence, see our guide to security cheques. The law raises a presumption in favour of the payee that the cheque was issued for a debt, but the accused can rebut it by showing, on a balance of probabilities, that no debt existed. Records, messages and bank statements are key.

What Happens If You Do Not Pay or Reply?

The payee can file a complaint before a Magistrate. The court issues summons, and you must appear, usually through an advocate. If convicted, the punishment can be imprisonment of up to two years, a fine of up to twice the cheque amount, or both. The court can also order interim compensation of up to twenty percent of the cheque amount at an early stage under Section 143A, though the Supreme Court has said that this is discretionary and not automatic. In an appeal against conviction, the appellant must generally deposit at least twenty percent of the fine or compensation.

Can the Case Be Settled?

Yes. Section 138 offences are compoundable, and courts encourage settlement at any stage, including through Lok Adalat and mediation. Payment with a reasonable amount for costs and interest often ends the case. Compounding at a later stage may involve additional costs, so earlier settlement is usually cheaper.

Will You Be Arrested?

A Section 138 case is not usually started with arrest. It proceeds by summons. If you do not appear after summons, the court can issue a warrant, so do not ignore summons. Appear on the date, apply for exemption from personal appearance where the law allows, and let your advocate handle the proceedings.

What If the Cheque Was Issued by a Company?

Then the company and the people in charge of its business can be accused, as our guide to director liability in cheque bounce cases explains. A director or signatory who receives a notice should take advice at once. For the payee's side of the story and the civil options, see our guide to cheque bounce and civil recovery.

The fifteen days are short, so act on the day you receive the notice. Our Criminal Law practice advises people who have received cheque bounce notices, and you can request a consultation. This is general information and not advice on your case.