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Section 138 Negotiable Instruments Act 1881 (NI Act): Cheque Bounce or Dishonor of Cheque
August 18, 2026Section 138 of the NI Act (Negotiable Instruments Act 1881) is a significant provision for commercial transactions. It safeguards the credibility of negotiable instruments and addresses the issue of cheque dishonour due to insufficient funds. Section 138 of the NI Act, in simple terms, provides the legal consequences of a bounced cheque due to insufficient funds in the bank account of the person who has issued the cheque. The provision aims to ensure that cheques are honoured promptly to maintain the trust of financial transactions. This article attempts to give you an overall understanding of the section.
In the case of dishonor of a cheque, one can send a legal notice and follow the legal procedure to get the cheque honoured. For this, you will need the help of a cheque bounce lawyer. You can also refer to LawRato's article on “ How to File a Cheque Bounce Case” .
Dishonour of Cheque under Section 138 of the NI Act due to insufficient funds:
When someone writes a cheque to pay someone else, but the cheque bounces because there isn't sufficient money in the account or it exceeds the agreed limit, it's considered a serious offence. The person who wrote the cheque can be punished with imprisonment for up to two years, fined up to twice the amount of the bounced cheque, or both. However, there are conditions for this punishment to apply:
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The bounced cheque has to be presented to the bank within six months from the date it was written or within its validity period, whichever comes first.
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The person to whom the cheque was written must demand payment within thirty days of receiving notice from the bank that the cheque bounced and file a cheque bounce case.
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In the event the person who wrote the cheque fails to make the payment within fifteen days of receiving the demand notice, then they are considered to have committed an offence.
In simple language, this means that if you write a cheque and it bounces due to insufficient funds or it exceeds the agreed limit of your bank account, you can face legal consequences on account of bouncing of cheque if you don't rectify the situation promptly after being notified.
Top Cheque Bounce Lawyers in India
Why do you need a lawyer for a cheque bounce case?
Facing a cheque bounce situation can possibly land you dealing with potential criminal legal consequences. Engaging with a cheque bounce lawyer to handle your case is crucial to deal with this legal journey effectively. The lawyer may need your assistance to understand the facts, but with their expertise, they manage all paperwork and provide strategic guidance, allowing you to focus on your business and priorities. A seasoned attorney offers tailored advice based on extensive experience, ensuring you avoid costly mistakes and future legal complications. Utilizing resources like LawRato's Free Legal Advice service can further assist in understanding your options and securing your interests under the law. For more information, you can refer to LawRato's Law Cheque Bounce Law Guides and Articles.
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My cheque bounced 2 months back. What legal action can I take?
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