Cheque Bounce Cases Under Section 138 NI Act in 2026: Deadlines, Defences, Settlement and the Supreme Court's Latest Rulings
A dishonoured cheque can lead to a criminal case, but only if strict statutory deadlines are met. This article explains each step under Section 138 of the Negotiable Instruments Act, the presumption against the drawer and how it is rebutted, the liability of company directors, interim compensation, and the graded settlement costs laid down by the Supreme Court in Sanjabij Tari (2025), together with the Court's 2026 rulings on delay, presumption, multiple cheques and directors.
A dishonoured cheque is one of the few civil defaults that Indian law also treats as a criminal offence. Section 138 of the Negotiable Instruments Act, 1881 (NI Act) allows the payee to prosecute the drawer when a cheque given for a debt is returned unpaid and the drawer fails to pay after a written demand. The remedy is effective, but it is also technical: a missed deadline at any stage can defeat an otherwise valid claim, and a drawer who understands the law has defences that are often overlooked.
This article explains the statutory steps, the presumption that operates against the drawer, the position of company directors, interim compensation and appeal deposits, and settlement. It also covers the Supreme Court's directions in Sanjabij Tari v. Kishore S. Borcar (2025) and its rulings in 2026. It reflects the law as verified on 19 October 2026.
THE STATUTORY TIMELINE
Section 138 applies where a cheque drawn on an account to discharge a legally enforceable debt or other liability is returned unpaid, either because the funds are insufficient or because the amount exceeds what has been arranged with the bank. The offence is complete only when three conditions in the proviso are satisfied.
First, the cheque must be presented to the bank within six months from its date or within its period of validity, whichever is earlier. Under the Reserve Bank of India's directions, cheques have been valid for three months from their date since 1 April 2012, so in practice the cheque must be presented within three months.
Second, the payee must give the drawer a written notice demanding payment within thirty days of receiving information from the bank that the cheque has been returned unpaid. Third, the drawer must fail to pay the amount within fifteen days of receiving the notice. The cause of action arises on the expiry of those fifteen days.
Under Section 142(1)(b), the complaint must then be filed within one month of the date on which the cause of action arises. The proviso permits a court to take cognizance of a later complaint if the complainant shows sufficient cause for the delay.
The order of these steps matters. In S. Nagesh v. Shobha S. Aradhya, 2026 INSC 27, decided on 6 January 2026, the complaint had been filed two days late and the Magistrate took cognizance without first condoning the delay. The Supreme Court held that the satisfaction resulting in condonation must precede the act of taking cognizance, and quashed the complaint (paragraphs 14 and 15). A complainant who files late must therefore seek condonation at the outset, with an explanation of the delay.
WHERE THE COMPLAINT IS FILED
Section 142(2), inserted in 2015, fixes territorial jurisdiction. Where the cheque is delivered for collection through an account, the complaint lies before the court within whose jurisdiction the branch of the bank where the payee maintains the account is situated. Where it is presented otherwise than through an account, the complaint lies where the drawer's bank branch is situated. The complaint must be tried by a Metropolitan Magistrate or Judicial Magistrate of the First Class.
THE PRESUMPTION AGAINST THE DRAWER
Section 139 presumes, unless the contrary is proved, that the holder of a cheque received it in discharge of a debt or other liability. Once the drawer admits issuing and signing the cheque, the burden shifts to the drawer to rebut the presumption.
In Renuka v. State of Maharashtra, 2026 INSC 327, decided on 7 April 2026, the Sessions Court and the High Court had set aside the summoning order on the view that the debt was not legally enforceable. The Supreme Court held that where issuance and signature are not disputed, the presumption arises, that it cannot be dislodged in a summary manner at the stage of issuing process, and that the rebuttal can only be made during the course of trial. The complaint was restored (paragraphs 8 to 11).
In Sanjabij Tari v. Kishore S. Borcar, 2025 INSC 1158, decided on 25 September 2025, the Supreme Court rejected the view that a cash loan exceeding twenty thousand rupees is not a legally enforceable debt because it contravenes Section 269SS of the Income Tax Act, 1961. The Court held that such a contravention attracts a penalty under the Income Tax Act but does not make the transaction void or rebut the presumptions under Sections 118 and 139 (paragraphs 19 and 20).
For the drawer, the practical point is that a defence, such as the cheque having been given as security for a liability that never arose, or the debt having already been discharged, must be established through evidence at trial. Applications to quash the complaint at the threshold on such grounds will ordinarily not succeed where the ingredients of Section 138 are made out on the face of the complaint.
COMPANIES AND THEIR DIRECTORS
Where the drawer is a company, Section 141 extends liability to every person who, at the time of the offence, was in charge of and responsible to the company for the conduct of its business. The complaint must contain a specific averment to that effect. In Saroj Pandey v. Govt. of NCT of Delhi, 2026 INSC 324, decided on 7 April 2026, the Supreme Court reiterated that merely being a director is not sufficient, held that signing a board resolution on a policy decision does not show that a director was responsible for day-to-day affairs, and quashed the proceedings against the appellant (paragraphs 6 to 8 and 11).
MULTIPLE CHEQUES FROM ONE TRANSACTION
Where several cheques are issued in a single transaction, each dishonour may give rise to a separate complaint. In Sumit Bansal v. MGI Developers and Promoters, 2026 INSC 40, decided on 8 January 2026, the Supreme Court held that a separate cause of action arises on each dishonour once the statutory sequence is complete, that the scheme of Section 138 does not bar separate complaints for distinct cheques, and that whether particular cheques were alternative or substitute securities is a question for trial (paragraphs 33 and 34).
THE SUPREME COURT'S 2025 DIRECTIONS ON PROCEDURE
In Sanjabij Tari, the Court issued directions to reduce delay in cheque-bounce cases (paragraph 36). Summons are to be served through ordinary modes and also dasti, and through electronic means, with the complainant furnishing the accused's email, mobile and messaging details on affidavit. Every complaint must carry a synopsis in a prescribed format. District courts are to provide online payment facilities so that an accused can pay the cheque amount at the initial stage, and the summons must mention that option.
The Court also held that no summons need be issued to the accused under Section 223 of the Bharatiya Nagarik Suraksha Sanhita, 2023 before cognizance is taken of a Section 138 complaint. It directed that cases be tried summarily unless cogent reasons are recorded for converting them into summons trials, and that interim compensation under Section 143A be considered as early as possible.
INTERIM COMPENSATION AND DEPOSIT IN APPEAL
Section 143A permits the trial court to direct the drawer to pay interim compensation not exceeding twenty per cent of the cheque amount, once the accused pleads not guilty in a summary or summons trial, or once the charge is framed in other cases. The amount is payable within sixty days, extendable by thirty days, and must be refunded with interest if the accused is acquitted.
In Rakesh Ranjan Shrivastava v. State of Jharkhand, 2024 INSC 205, decided on 15 March 2024, the Supreme Court held that the power under Section 143A is discretionary and not mandatory. The court must make a prima facie evaluation of the complaint and the defence, may decline interim compensation where the defence appears plausible, must consider factors such as the nature of the transaction and the accused's paying capacity in fixing the amount, and must record brief reasons (paragraph 19).
Section 148 permits the appellate court, in an appeal by a drawer against conviction, to direct a deposit of at least twenty per cent of the fine or compensation awarded by the trial court. In Rakesh Ranjan Shrivastava, the Court noted its earlier decisions treating such a deposit as the normal rule in appeals, subject to exceptions for recorded reasons, and held that those tests do not apply to Section 143A, which operates before any conviction (paragraphs 15 and 15.1).
SETTLEMENT AND COMPOUNDING
The offence is compoundable under Section 147. In Sanjabij Tari, the Supreme Court revised the graded costs that apply when a case is settled (paragraph 38). If the accused pays before recording of defence evidence, the trial court may allow compounding without any cost. After defence evidence but before judgment, an additional five per cent of the cheque amount is payable to the Legal Services Authority or another designated authority. Before the Sessions Court or High Court in revision or appeal, the cost is seven and a half per cent, and before the Supreme Court it is ten per cent of the cheque amount.
The incentive is clear: for a drawer who intends to pay, settling early is significantly cheaper. For a complainant, an early settlement secures the money without the delay of a full trial.
PUNISHMENT
On conviction, Section 138 prescribes 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. Amounts already paid as interim compensation under Section 143A are adjusted against the fine or compensation.
INSOLVENCY OF THE DRAWER
Where the drawer is undergoing insolvency proceedings, the effect of the moratorium on a pending Section 138 case requires separate consideration. In Dineshchand Surana v. UCO Bank, 2026 INSC 579, decided on 27 May 2026, a two-Judge Bench considering the moratorium in individual insolvency under Part III of the Insolvency and Bankruptcy Code, 2016 expressed the view that Section 138 proceedings have a criminal character and that the moratorium should affect only their compensatory aspect, and referred the question to a larger Bench. Until the reference is decided, the position should be examined with care in each case.
DOCUMENTS TO GATHER
For a complainant: the original dishonoured cheque; the bank's return memo with the date on which information of dishonour was received; the demand notice, with postal receipts, tracking reports and proof of delivery or refusal; documents evidencing the debt, such as the agreement, invoices, ledger entries or bank transfers; and, for a company drawer, material showing the role of each director. For an accused: the documents relating to the purpose for which the cheque was issued; proof of any payment or discharge; correspondence with the complainant; and, for a director, material showing the absence of any role in the conduct of the company's business at the relevant time.
PRACTICAL SUMMARY
A Section 138 case depends first on dates: presentation within the cheque's validity, notice within thirty days of information of dishonour, fifteen days for payment, and a complaint within one month thereafter, with any delay explained and condoned before cognizance. Once issuance and signature are admitted, the presumption under Section 139 places the burden on the drawer, and defences are ordinarily tested at trial rather than on a petition to quash. Directors are liable only where the complaint specifically shows their role. Interim compensation is discretionary, and settlement costs rise at each stage of the case. Both sides benefit from an early assessment of the documents and the timeline.
This article is intended for general information and does not constitute legal advice. The applicable law and the facts of each case should be examined before any action is taken.
Key Authorities Cited
- Sanjabij Tari v. Kishore S. Borcar — Supreme Court of India, September 25, 2025, [2025] 9 S.C.R. 1515; 2025 INSC 1158 (paras 19, 20, 36, 38)
- S. Nagesh v. Shobha S. Aradhya — Supreme Court of India, January 6, 2026, 2026 INSC 27 (paras 14, 15)
- Sumit Bansal v. MGI Developers and Promoters — Supreme Court of India, January 8, 2026, 2026 INSC 40 (paras 33, 34)
- Renuka v. State of Maharashtra — Supreme Court of India, April 7, 2026, [2026] 5 S.C.R. 26; 2026 INSC 327 (paras 8, 9, 10, 11)
- Saroj Pandey v. Govt. of NCT of Delhi — Supreme Court of India, April 7, 2026, 2026 INSC 324 (paras 6, 7, 8, 11)
- Rakesh Ranjan Shrivastava v. State of Jharkhand — Supreme Court of India, March 15, 2024, 2024 INSC 205 (paras 15, 19)
- Dineshchand Surana v. UCO Bank — Supreme Court of India, May 27, 2026, 2026 INSC 579
Statutory Provisions
- Negotiable Instruments Act, 1881 — Section 138 (dishonour of cheque; presentation, thirty-day notice and fifteen-day payment requirements; punishment up to two years or fine up to twice the cheque amount)
- Negotiable Instruments Act, 1881 — Section 139 (presumption in favour of the holder)
- Negotiable Instruments Act, 1881 — Section 141 (offences by companies)
- Negotiable Instruments Act, 1881 — Section 142 (complaint within one month of cause of action; condonation of delay; territorial jurisdiction under sub-section (2))
- Negotiable Instruments Act, 1881 — Section 143A (interim compensation up to twenty per cent) and Section 148 (deposit of at least twenty per cent in appeal)
- Negotiable Instruments Act, 1881 — Section 147 (offences compoundable)
- Bharatiya Nagarik Suraksha Sanhita, 2023 — Section 223 (examination of complainant; held in Sanjabij Tari not to require summons to the accused before cognizance of a Section 138 complaint)
- Income Tax Act, 1961 — Section 269SS (cash loans above twenty thousand rupees; contravention does not render the debt unenforceable for Section 138)
Frequently Asked Questions
What is the time limit to send a legal notice after a cheque bounces?
The written demand notice must be sent within thirty days of receiving information from the bank that the cheque has been returned unpaid. The drawer then has fifteen days from receipt of the notice to pay.
When must a cheque bounce complaint be filed?
Within one month from the date on which the cause of action arises, which is the day after the fifteen-day payment period expires. A court may accept a later complaint if sufficient cause is shown, but in S. Nagesh v. Shobha S. Aradhya (January 2026) the Supreme Court held that the delay must be condoned before the court takes cognizance.
Where should a cheque bounce case be filed?
Under Section 142(2), where the cheque was deposited for collection through an account, the case is filed in the court having jurisdiction over the branch where the payee maintains that account. Where it was presented otherwise than through an account, it is filed where the drawer's bank branch is located.
Is a cheque given for a cash loan above Rs. 20,000 enforceable under Section 138?
Yes. In Sanjabij Tari v. Kishore S. Borcar (September 2025), the Supreme Court held that contravention of Section 269SS of the Income Tax Act attracts a tax penalty but does not make the debt legally unenforceable or rebut the presumption under Section 139.
Can a director of a company be prosecuted for a company's bounced cheque?
Only if the complaint specifically avers that the director was in charge of and responsible for the conduct of the company's business when the offence was committed. In Saroj Pandey v. Govt. of NCT of Delhi (April 2026), the Supreme Court held that being a director, or signing a board resolution, is not enough.
Is interim compensation under Section 143A automatic?
No. In Rakesh Ranjan Shrivastava v. State of Jharkhand (2024), the Supreme Court held that the power is discretionary. The court must evaluate the case prima facie, may refuse it where the defence is plausible, and must give reasons for the amount, which cannot exceed twenty per cent of the cheque amount.
How much extra does it cost to settle a cheque bounce case?
Under the Supreme Court's revised guidelines in Sanjabij Tari, there is no additional cost if the accused pays before defence evidence is recorded. Thereafter, the cost is five per cent of the cheque amount before judgment, seven and a half per cent before the Sessions Court or High Court, and ten per cent before the Supreme Court.
Can the accused get the complaint quashed by arguing that no debt was owed?
Ordinarily not at the threshold. Where the accused admits issuing and signing the cheque, the presumption under Section 139 applies, and in Renuka v. State of Maharashtra (April 2026) the Supreme Court held that it can be rebutted only during the trial.