A dishonoured cheque in India is prosecuted under Section 138 of the Negotiable Instruments Act, 1881 — untouched by the BNS, BNSS or BSA — carrying up to two years' imprisonment or a fine up to twice the cheque amount; if dishonest intent existed from the start, a separate cheating case can also run under Section 318 BNS (Section 420 IPC for pre-1 July 2024 conduct).
The situation
A person receives a cheque towards repayment of a loan, a business payment or any other debt, deposits it, and the bank returns it unpaid — because the account did not hold sufficient funds, or the amount exceeded an arrangement with the bank. The payee wants to know what legal steps are available: a complaint under the Negotiable Instruments Act, a criminal complaint for cheating, or both, and what has changed, if anything, now that the IPC has been replaced by the BNS.
Old law vs new law at a glance
| Issue | Position under the Negotiable Instruments Act, 1881 (unchanged) | What the 2023 codes changed |
|---|---|---|
| What makes a bounced cheque an offence | Section 138: cheque returned unpaid for insufficient funds or an amount exceeding the arrangement with the bank | Nothing — the NI Act was not amended |
| Presentation window | Section 138 proviso (a): within six months of the date on the cheque, or its validity period, whichever is earlier | Nothing |
| Notice period after learning of dishonour | Section 138 proviso (b): written notice within 30 days | Nothing |
| Drawer's payment window after notice | Section 138 proviso (c): 15 days from receipt of notice | Nothing |
| Punishment for the Section 138 offence | Up to two years' imprisonment, or fine up to twice the cheque amount, or both | Nothing |
| Limitation to file the complaint | Section 142(1)(b): within one month of the cause of action accruing, extendable for sufficient cause | Nothing |
| Interim compensation before the case concludes | Section 143A (inserted 2018): up to 20 percent of the cheque amount | Nothing — this was a 2018 amendment to the NI Act itself, unrelated to the 2023 codes |
| Deposit required to appeal a conviction | Section 148 (inserted 2018): minimum 20 percent of the fine or compensation awarded | Nothing |
| Whether the offence is compoundable | Section 147: every offence under the Act is compoundable | Nothing |
| Parallel cheating charge over the same cheque, if dishonest intent existed from the outset | Section 420 IPC — up to seven years, and fine | Section 318(4) BNS — same wording, same seven-year maximum, applies to conduct on or after 1 July 2024 |
What the law requires now, step by step
Step 1 — The cheque must be dishonoured for one of the Section 138 reasons
Section 138 NI Act applies where a cheque "is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank." These are the only two grounds of return that Section 138 names.
Step 2 — Three conditions in the proviso must all be met
Section 138 only bites if:
"(a) the cheque has been presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier; (b) the payee or the holder in due course... makes a demand for the payment... within thirty days of the receipt of information by him from the bank regarding the return of the cheque as unpaid; and (c) the drawer of such cheque fails to make the payment... within fifteen days of the receipt of the said notice."
All three conditions — timely presentation, a notice within 30 days, and non-payment within 15 days of that notice — must be satisfied before the offence is complete.
Step 3 — Filing the complaint
Section 142(1) restricts who can approach the court and when: "no court shall take cognizance of any offence punishable under section 138 except upon a complaint, in writing, made by the payee or, as the case may be, the holder in due course of the cheque," and that complaint must be made "within one month of the date on which the cause of action arises." A proviso lets the court admit a late complaint if the complainant shows sufficient cause. Section 142(1)(c) also restricts which court can try the case: "no court inferior to that of a Metropolitan Magistrate or a Judicial Magistrate of the first class shall try any offence punishable under section 138." Section 142(2), inserted in 2015, fixes territorial jurisdiction at the branch of the bank where the payee's account is maintained (for collection) or the drawer's account is maintained (for direct presentation).
Step 4 — The court can order interim compensation
Once the drawer pleads not guilty in a summary trial or a summons case, or once charge is framed in any other case, Section 143A allows the court to order the drawer to pay interim compensation "not exceed[ing] twenty per cent. of the amount of the cheque", payable within 60 days (extendable by 30 days for sufficient cause). If the drawer is acquitted, Section 143A(4) requires the complainant to repay this amount with interest at the Reserve Bank of India's bank rate.
Step 5 — Where a separate cheating case can run
The NI Act complaint does not require proof that the drawer intended to defraud the payee from the outset — only that a cheque was dishonoured after the statutory conditions were met. A cheating case is a different offence with a different mental element. Section 318(1) BNS defines cheating as inducing the person deceived, "by deceiving" him, to deliver property, and Section 318(4) BNS (the successor to Section 420 IPC) punishes cheating that "dishonestly induces" delivery of property. The section's own illustrations draw the line: under Illustration (d), a person who tenders "a bill on a house with which A keeps no money", expecting it to be dishonoured, and thereby obtains an article, cheats; under Illustration (g), a person who intended to perform when obtaining the money and afterwards breaks the contract "does not cheat, but is liable only to a civil action for breach of contract." Where the facts fit the first pattern, a cheating complaint is a separate route from the Section 138 NI Act complaint; Section 26 of the General Clauses Act, 1897, allows prosecution under either or any of two enactments that cover the same act, but bars punishing the offender twice for the same offence. If the cheating offence was committed before 1 July 2024, this parallel charge is framed under Section 420 IPC; if committed on or after that date, under Section 318(4) BNS.
Step 6 — Appeal against conviction
Section 148, also inserted in 2018, allows the Appellate Court, in an appeal by the drawer against conviction under Section 138, to order the appellant to deposit a sum "which shall be a minimum of twenty per cent. of the fine or compensation awarded by the trial Court", in addition to any interim compensation already paid under Section 143A, within 60 days (extendable by 30 days for sufficient cause).
What changed — and what did not
- Identical: Every operative provision of the Section 138 NI Act scheme — the dishonour trigger, the six-month presentation window, the 30-day notice period, the 15-day payment window, the two-year/twice-the-amount punishment, the one-month complaint limitation, interim compensation up to 20 percent, the appellate deposit, and compoundability under Section 147 — is unchanged by the BNS, BNSS or BSA. The NI Act was amended in 2002, 2015 and 2018, well before the 2023 codes, and none of those amendments were touched by the criminal-law reform.
- Identical: The cheating offence that can run in parallel keeps the same seven-year maximum and materially the same wording — only the citation moves from Section 420 IPC to Section 318(4) BNS depending on the date of the cheque.
- Not verified in this guide: the NI Act text in the Bare Act library still refers throughout to "the Code of Criminal Procedure, 1973" (for example in Sections 142, 142A, 143, 143A, 144, 145, 147 and 148) rather than to the BNSS. This guide reports that text as found; it does not draw a conclusion about whether those cross-references have since been updated by a separate instrument, which was outside the scope of what was checked here.
Which law applies to your case
Whether a parallel cheating charge over the cheque is framed under Section 420 IPC or Section 318(4) BNS depends on when the cheating offence was committed, not on when the complaint is filed. Section 358(2) BNS preserves this: it provides that the IPC's repeal does not affect "any penalty, or punishment incurred in respect of any offences committed against the Code so repealed", and that such proceedings "may be instituted, continued or enforced... as if that Code had not been repealed." The Section 138 NI Act complaint itself is unaffected either way, since that Act was not repealed or amended by the 2023 codes. For the full transition rule, see Which law applies to an offence committed before 1 July 2024.
Practical checklist
For the payee:
- Confirm the three Section 138 conditions in order — presentation within six months (or validity), notice within 30 days of learning of dishonour, and the drawer's 15-day payment window — before filing, since missing any one is fatal to the complaint.
- File the written complaint within one month of the cause of action (the expiry of the drawer's 15-day window), or be ready to show sufficient cause for delay.
- Separately assess, with evidence, whether the drawer's conduct also shows dishonest intent from the time the cheque was issued — that is what a parallel cheating complaint requires, and Section 138 alone does not establish it.
For the advocate:
- Verify the date the cheating offence was committed to decide whether any parallel cheating charge should be framed under Section 420 IPC or Section 318(4) BNS.
- Confirm territorial jurisdiction under Section 142(2) — the bank branch where the relevant account is maintained, not necessarily where the client is located.
- Where interim compensation is sought under Section 143A, calculate the 20-percent cap correctly and track the 60-day (plus permissible 30-day extension) payment window; the same applies to the Section 148 appellate deposit, where the Appellate Court orders one.
Frequently asked questions
If my cheque bounced, is that automatically a criminal offence?
Only once Section 138 of the Negotiable Instruments Act, 1881, is satisfied: the cheque must have been drawn for the discharge of a legally enforceable debt or other liability and returned unpaid because the funds were insufficient or the amount exceeded the arrangement with the bank; and, under the proviso, the cheque was presented within six months (or its validity period, whichever is earlier), you sent a written notice demanding payment within 30 days of learning of the dishonour, and the drawer failed to pay within 15 days of receiving that notice. Only after all three proviso conditions are satisfied does the drawer's failure amount to an offence.
What is the punishment for cheque bounce under Section 138?
Imprisonment for a term which may extend to two years, or a fine which may extend to twice the amount of the cheque, or both.
Has Section 138 NI Act changed under BNS, BNSS or BSA?
No. Sections 138 to 148 of the Negotiable Instruments Act, 1881, were not amended by the 2023 criminal-law codes. The provisions in force today are the same ones amended in 2002, 2015 and 2018.
Can the same bounced cheque also lead to a cheating case under Section 318 BNS?
Yes, if the facts show the drawer had a dishonest or fraudulent intention from the outset — for example, issuing a cheque on an account the drawer knew was closed or would never be funded. A Section 138 NI Act complaint and a cheating complaint under Section 318 BNS (Section 420 IPC for conduct before 1 July 2024) are different offences with different ingredients. Section 26 of the General Clauses Act, 1897, provides that where an act or omission constitutes an offence under two or more enactments, the offender is liable to be prosecuted and punished under either or any of them, but shall not be liable to be punished twice for the same offence.
Can the court order the drawer to pay something before the case is even decided?
Yes. Section 143A of the NI Act lets the court trying a Section 138 case order the drawer to pay interim compensation of up to 20 percent of the cheque amount, once the drawer pleads not guilty (in a summary or summons case) or once charge is framed (in any other case).
Is cheque bounce a compoundable offence?
Yes. Section 147 of the NI Act states that every offence punishable under the Act is compoundable, meaning the complainant and the drawer can settle the matter and have the proceeding closed.
Related on Veritect
- Which law applies to an offence committed before 1 July 2024
- Section 415-420 IPC vs Section 318-319 BNS — Cheating
- Settling a criminal case: compounding under Section 359 BNSS
- Victim of an online or digital arrest scam
Statutory sources
- Negotiable Instruments Act, 1881 — Sections 138, 139, 140, 141, 142, 142A, 143A, 144, 145, 146, 147, 148 (unamended by the 2023 criminal-law codes)
- Indian Penal Code, 1860 — Section 420 (repealed w.e.f. 1 July 2024)
- Bharatiya Nyaya Sanhita, 2023 — Sections 318, 358
- General Clauses Act, 1897 — Section 26
This guide explains the statutory text of the BNS, BNSS and BSA as enacted. It is not legal advice; for a specific case, consult an advocate.