Cheque Bounce Case Trial Stages under Section 138 of the NI Act
A practical, updated guide to the legal notice, complaint filing, jurisdiction, summons, evidence, defence, judgment, interim compensation and appeal process in cheque dishonour cases under the Negotiable Instruments Act, 1881.
Requirements for a Cheque Bounce Case under Section 138
Section 138 applies where a cheque drawn on an account maintained by the drawer is returned unpaid for insufficiency of funds or because the amount exceeds the arrangement with the bank, provided the statutory requirements are fulfilled.
- The cheque must have been issued for discharge, wholly or partly, of a legally enforceable debt or other liability.
- The cheque must be presented within its period of validity.
- The payee or holder in due course must issue a written demand notice within 30 days of receiving information from the bank about dishonour.
- The drawer must fail to pay the cheque amount within 15 days of receiving the statutory notice.
- A written complaint by the payee or holder in due course must ordinarily be filed within one month from the date on which the cause of action arises. The court may condone delay on sufficient cause being shown.
Which Court Has Jurisdiction?
Under Section 142(2), territorial jurisdiction depends on the manner in which the cheque is presented. Where it is delivered for collection through an account, the case is generally tried by the court having jurisdiction over the branch where the payee or holder in due course maintains the account. Where the cheque is presented otherwise than through an account, jurisdiction is linked to the branch of the drawee bank where the drawer maintains the account.
A Section 138 offence is triable by a Metropolitan Magistrate or Judicial Magistrate of the First Class, subject to the special procedure provided in Chapter XVII of the Negotiable Instruments Act.
Stages of Trial in a Section 138 Cheque Bounce Case
Stage 1: Filing of the Complaint
The complainant files the written complaint with the competent Magistrate along with the cheque, bank return memo, statutory demand notice, proof of dispatch/service, relevant transaction documents and the required affidavit or supporting material. Depending on the facts, invoices, agreements, account statements, acknowledgements or other proof of the legally enforceable liability may also be relevant.
Stage 2: Cognizance, Verification and Issue of Summons
The Magistrate examines whether the complaint and supporting material disclose the ingredients of Section 138. Evidence of the complainant may be given on affidavit under Section 145. If sufficient grounds are found, process is issued to the accused. Section 144 contains a special provision for service of summons, including service by speed post or approved courier.
Stage 3: Appearance of the Accused and Plea
After service of summons, the accused appears before the court personally or through counsel where exemption from personal appearance is permitted. In a summons case, the substance of the accusation is stated and the accused is asked whether the accusation is admitted or a defence is claimed. If the accused pleads guilty, the court may proceed according to law; otherwise, the matter moves to trial.
Stage 4: Complainant's Evidence
The complainant's evidence can be tendered by affidavit under Section 145 of the Negotiable Instruments Act. Original documents and other admissible evidence are produced as required. The bank's slip or memo bearing the official mark of dishonour is prima facie evidence of dishonour under Section 146, unless disproved.
Stage 5: Cross-Examination
On the application of the accused or prosecution, the court can summon and examine the person whose evidence has been given on affidavit. The accused may cross-examine the complainant and other prosecution witnesses on the transaction, liability, cheque, notice, service and other disputed facts.
Stage 6: Examination of the Accused and Defence Evidence
The accused is given the opportunity required by criminal procedure to explain incriminating circumstances appearing in the evidence. The defence may rely on documents, witnesses and other admissible material. The accused is not required to disprove the complainant's case beyond reasonable doubt; the statutory presumptions may be rebutted on the applicable standard of proof.
Stage 7: Final Arguments
Both sides address the court on the evidence and law. Written submissions and binding precedents may be relied upon. Section 143 requires Section 138 trials to be conducted as expeditiously as possible, and the statute states that an endeavour should be made to conclude the trial within six months from the date of filing the complaint.
Stage 8: Judgment
If the prosecution proves the offence, Section 138 permits imprisonment for a term that may extend to two years, or fine that may extend to twice the cheque amount, or both. The court may also pass lawful compensation-related directions. If the offence is not proved, the accused is acquitted.
Presumptions, Liability and Evidence
Section 139 creates a statutory presumption, unless the contrary is proved, that the holder received the cheque for discharge, wholly or partly, of a debt or other liability. This operates with the relevant presumptions under Section 118. The accused can rebut the presumption by raising a probable defence from the complainant's own material, cross-examination, defence evidence or surrounding circumstances.
Section 146 separately provides that the bank's return slip or memo carrying the official mark denoting dishonour is prima facie evidence of the fact of dishonour.
Interim Compensation under Section 143A
The trial court may, in the situations specified by Section 143A, direct the drawer to pay interim compensation to the complainant. The amount cannot exceed 20% of the cheque amount. The Supreme Court has clarified that this power is discretionary, not mandatory, and the court should record brief reasons after considering the relevant factors and the prima facie merits of both sides.
If ordered, the amount is payable within 60 days, with a possible further period not exceeding 30 days on sufficient cause. If the drawer is acquitted, the statute requires repayment by the complainant with the prescribed interest mechanism.
Appeal after Conviction and Deposit under Section 148
A person convicted under Section 138 may challenge the conviction before the competent appellate court within the applicable limitation period and may seek suspension of sentence in accordance with law.
Section 148 authorises the appellate court to direct the appellant to deposit a sum that is ordinarily at least 20% of the fine or compensation awarded by the trial court, in addition to any interim compensation already paid under Section 143A. Supreme Court decisions explain that such a deposit is normally justified, although an exception may be made for recorded reasons where the condition would be unjust or would effectively deprive the appellant of the right of appeal.
Compounding and Settlement
Section 147 makes offences under the Negotiable Instruments Act compoundable. Therefore, a Section 138 dispute may be settled and compounded in accordance with law at an appropriate stage, subject to the orders of the court and applicable judicial directions.
Current Criminal Procedure after 1 July 2024: BNSS and BSA
The Bharatiya Nagarik Suraksha Sanhita, 2023 (BNSS) and the Bharatiya Sakshya Adhiniyam, 2023 (BSA) came into force on 1 July 2024. They replaced the Code of Criminal Procedure, 1973 and the Indian Evidence Act, 1872 for proceedings governed by the new enactments, subject to statutory savings and transition provisions.
Section 138 proceedings remain governed principally by the Negotiable Instruments Act, 1881, which contains special provisions on cognizance, jurisdiction, summary trial, interim compensation, service of summons, affidavit evidence, proof of bank memo and compounding. Some provisions in Chapter XVII still contain textual references to the former Code of Criminal Procedure. In an actual case, the applicable procedural provision should therefore be checked with reference to the date of institution, transition/savings rules, local court rules and binding judicial directions.
Important Provisions for Cheque Bounce Cases
| Provision | Subject |
|---|---|
| Section 118 | Statutory presumptions as to negotiable instruments |
| Section 138 | Dishonour of cheque for insufficiency, etc., of funds |
| Section 139 | Presumption in favour of holder |
| Section 141 | Offences by companies |
| Section 142 | Cognizance, limitation and territorial jurisdiction |
| Section 143 | Summary trial and expeditious disposal |
| Section 143A | Interim compensation |
| Section 144 | Mode of service of summons |
| Section 145 | Evidence on affidavit |
| Section 146 | Bank memo as prima facie evidence |
| Section 147 | Compounding of offences |
| Section 148 | Deposit pending appeal against conviction |
Legal note: This page is a general legal information resource. Limitation, service, jurisdiction, presumptions, company liability, electronic evidence, compounding and appellate remedies can depend on the facts and applicable court rules.