The Complete Guide to Section 138 NI Act Cases in 2026: From Filing to Execution

June 21, 2026 · 11 min read · Practice Guide

Cheque bounce cases under Section 138 remain the highest-volume criminal cases in Indian courts. This step-by-step guide covers the entire lifecycle from demand notice to decree execution.

Section 138 of the Negotiable Instruments Act, 1881 remains the single largest category of criminal cases in Indian courts. According to the National Judicial Data Grid, over 35 lakh cheque bounce cases are pending across India as of early 2026. For many lawyers - particularly sole practitioners and small firms - Section 138 cases constitute the bulk of their criminal practice.

Despite this volume, practitioners routinely make procedural errors that lead to acquittals. The statutory scheme is precise and unforgiving: miss a deadline by even one day, and the complaint becomes time-barred. Send a defective demand notice, and the entire case fails at the threshold.

This guide covers the complete lifecycle of a Section 138 case - from the moment a cheque is returned unpaid to the final execution of a compensation order.

Step 1: The Cheque Return - Understanding What Triggers Section 138

Not every dishonoured cheque attracts criminal liability. Section 138 applies only when:

The cheque was drawn on an account maintained by the drawer. Post-dated cheques are covered. Cheques issued as security are covered (settled by the Supreme Court in Rangappa v. Sri Mohan, 2010).

The cheque was issued for the discharge, in whole or in part, of a debt or other liability. Gift cheques or cheques without consideration do not attract Section 138.

The cheque was presented within its validity period (three months from the date on the cheque, or the period of its validity, whichever is earlier).

The cheque was returned unpaid due to insufficiency of funds or because the amount exceeds the arrangement made with the bank. Other return reasons (signature mismatch, account closed, payment stopped) may or may not attract Section 138 depending on the circumstances.

Common Mistake: Filing a complaint when the cheque was returned for "account closed." While some High Courts have held that account closure amounts to insufficiency of funds (since the balance is zero), the position is not uniform. Best practice is to check your jurisdictional High Court's position before filing.

Step 2: The Legal Demand Notice - Section 138(b)

Within 30 days of receiving information from the bank about the cheque return, the payee (or holder in due course) must send a written notice to the drawer demanding payment. This is not optional - it is a mandatory prerequisite.

The notice must:

Be in writing. Oral demands do not satisfy the requirement.

Demand payment of the cheque amount. You can also demand interest and notice costs, but the cheque amount must be specifically demanded.

Be sent to the correct address. The address on the cheque, the address on the bank records, or the last known address of the drawer. Sending to multiple addresses is advisable.

Be sent within 30 days of the cheque return memo date. Not 30 days from when you collected the return memo - 30 days from the date on the memo itself.

Sending the Notice - Best Practices:

Send by registered post with acknowledgment due (RPAD) AND by speed post AND by courier. Keep all postal receipts and tracking records.

Also send by email if you have the drawer's email address. While email alone may not satisfy the notice requirement, it provides additional evidence of communication.

Keep a photocopy of the notice with the postal receipt attached. This becomes Exhibit A in your complaint.

The 15-Day Waiting Period: After the notice is served (or deemed served - refusal or non-collection amounts to service), the drawer has 15 days to make payment. Only if payment is not received within these 15 days does the cause of action arise.

Common Mistake: Counting 15 days from the date of sending rather than the date of receipt. If you sent the notice on January 1 and it was delivered on January 5, the 15 days run from January 5, not January 1. The cause of action arises on January 21 (the day after the 15-day period expires).

Step 3: Filing the Complaint - The 30-Day Window

The complaint must be filed within 30 days of the expiry of the 15-day notice period. This is the deadline that catches the most practitioners. Miss it by even one day, and you need to file a condonation of delay application under Section 142(b) - which requires showing "sufficient cause" for the delay.

Territorial Jurisdiction:

The complaint can be filed in the court within whose jurisdiction the cheque was delivered for collection (the payee's bank branch location). This was settled by the Supreme Court in Dashrath Rupsingh Rathod v. State of Maharashtra (2014), later modified by the 2015 Amendment to Section 142, which restored jurisdiction to the branch where the cheque was presented for collection.

Practical Tip: File in the jurisdiction where your client's bank branch is located. This saves travel time and costs for your client during the trial.

Step 4: Evidence Preparation - Section 65B Compliance

In 2026, most banking records are digital. The cheque return memo, bank statements, and transaction records are generated electronically. Under Section 65B of the Indian Evidence Act (now the corresponding provision under Bharatiya Sakshya Adhiniyam, 2023), electronic records are admissible only with a certificate from a person occupying a responsible position in relation to the operation of the relevant device or management of the relevant activities.

What you need from the bank:

A certified copy of the cheque return memo with Section 65B certificate.

Certified bank statement showing the relevant account transactions.

Certificate confirming the cheque was presented and returned unpaid.

Common Mistake: Relying on printouts from internet banking without a Section 65B certificate. Courts routinely reject such evidence. Get the certificate from the bank at the time of collecting documents - do not wait until trial.

Your documentary evidence checklist:

1. Original dishonoured cheque (or certified true copy if original is with the bank) 2. Cheque return memo with 65B certificate 3. Copy of legal demand notice with postal receipts 4. Tracking records showing delivery or return of notice 5. Bank statement showing the underlying transaction 6. Any written communication establishing the debt or liability 7. Affidavit of evidence-in-chief

Step 5: The Trial Process

Section 138 cases follow a summary trial procedure for amounts up to INR 5 lakh and a summons trial procedure for higher amounts. The 2015 Amendment introduced Section 143A, which allows courts to direct the drawer to pay interim compensation (up to 20% of the cheque amount) at the time of framing notice.

Key Trial Stages:

Cognizance and Process: The Magistrate examines the complaint and supporting documents. If a prima facie case exists, summons is issued to the accused.

Notice to Accused and Section 143A Application: At this stage, file an application under Section 143A for interim compensation. Courts are increasingly granting this, which puts significant pressure on the accused to settle.

Accused's Plea: The accused either pleads guilty or claims trial. If guilty, sentencing follows immediately. If claiming trial, the case proceeds to evidence.

Complainant's Evidence: The complainant examines witnesses (usually just the complainant and possibly a bank official). Cross-examination by the accused follows.

Accused's Evidence: The accused presents defence evidence. Common defences include: the cheque was blank and misused, the cheque was issued as security (no longer a valid defence after Rangappa), the underlying debt is disputed, the notice was not received.

Arguments and Judgment: Both sides argue. The court delivers judgment.

Step 6: Sentencing and Compensation

On conviction, the court can impose:

Imprisonment up to two years (typically suspended in first offences).

Fine up to twice the cheque amount (under Section 138).

Compensation to the complainant under Section 357 CrPC (now Section 395 BNSS) - this is often more valuable than the fine.

Section 148 (introduced by the 2018 Amendment) provides that pending an appeal against conviction, the appellate court shall direct the convicted person to deposit at least 20% of the compensation awarded by the trial court.

Step 7: Execution of the Compensation Order

A compensation order under Section 138 is executable as a civil decree. If the convicted person does not pay voluntarily, you can:

File an execution petition in the same court that passed the order.

Attach the convicted person's bank accounts and movable property.

In extreme cases, seek civil imprisonment for non-compliance.

Compounding - The Settlement Option

At any stage before the final judgment, the parties can compound the offence under Section 147. This is effectively a settlement - the accused pays an agreed amount, and the complainant consents to withdrawal. The court then acquits the accused.

Compounding is often the most practical outcome. It saves years of litigation, guarantees recovery (even if partial), and avoids the uncertainty of trial. Most experienced practitioners advise clients to remain open to compounding at a reasonable figure rather than pursuing a conviction that may take five to seven years.

Common Mistakes That Lead to Acquittals

1. Notice sent after 30 days from the return memo date. 2. Complaint filed after 30 days from the cause of action without a condonation application. ## 3. Failure to prove service of notice (no postal receipts, no tracking records). 4. Section 65B certificate not obtained for electronic banking records. 5. Failure to prove the underlying debt or liability. ## 6. Filing against a company without making the responsible officer a co-accused (Section 141). 7. Presenting the cheque after its validity period. 8. Not proving that the complainant is the payee or holder in due course.

Each of these errors is avoidable with careful attention to procedure. In a high-volume practice handling dozens of Section 138 cases, systematic deadline tracking and document management are not luxuries - they are necessities.

Technology tools that automatically extract deadlines from cheque return memos and calculate the notice period, the 15-day waiting period, and the 30-day filing window can eliminate the most common source of dismissals - missed timelines.