A cheque is returned unpaid. The natural response is to telephone, to ask, to wait a little, to ask again. That is understandable and it is how a great many people lose a perfectly good claim, because the remedy under Section 138 of the Negotiable Instruments Act, 1881 runs on a clock that starts whether you are watching it or not.
The three periods
| Step | Period | Runs from |
|---|---|---|
| Send the demand notice | 30 days | Receiving information from the bank that the cheque has been returned unpaid |
| Drawer’s time to pay | 15 days | Receipt of the notice by the drawer |
| File the complaint | 1 month | Expiry of that 15-day period |
Miss the first period and the criminal remedy is generally gone, however good the underlying debt. Miss the third and the complaint is out of time. The civil claim for the money may survive, but that is a longer and different road.
When the section applies at all
The offence concerns a cheque returned unpaid because the funds in the account are insufficient, or because the amount exceeds the arrangement with the bank. The cheque must have been issued in discharge of a legally enforceable debt or liability — which is why the underlying transaction matters and why a cheque given as a blank security, or for a debt that is time-barred, raises different questions.
What the notice must do
It must be a demand for payment of the cheque amount, made to the drawer, within the thirty days. Practical points that decide cases:
- The correct person. Where the cheque is drawn by a company or a firm, who must be served, and who is liable, needs to be got right at the outset.
- The correct address. Service is frequently contested, so the address used should be one that can be justified.
- Proof of dispatch and delivery. Keep the postal receipt and the acknowledgement. The date of receipt starts the fifteen days, and proving it is your job.
- The right amount. Demand the cheque amount. Adding interest and costs into the demand invites an argument about whether a valid notice was given at all.
A notice returned unclaimed or refused is not necessarily fatal — the law has developed around deliberate avoidance — but it is far better to have a clean acknowledgement than to argue about it later. More on drafting and service is on the legal notice page.
If you have received such a notice
Take it seriously and take advice promptly, because the fifteen days are running. Paying within that period ends the matter. If the cheque was not issued for a debt, if it was given as security and misused, if the amount was altered, or if the debt has already been paid, those are answers — but they have to be made properly and on the documents, not by ignoring the notice and hoping.
What to bring
- The cheque itself
- The bank’s return memo, and the date you received it — this is the document that starts the clock
- Whatever establishes the debt: invoices, an agreement, a loan record, messages
- The drawer’s correct name and address, and details of the company or firm if the cheque is not personal
- Any notice already sent or received, with the postal records
The single most useful thing anyone can do on the day a cheque comes back is to note the date on the bank memo and start counting. Everything else can be organised afterwards.
This note sets out general information about procedure. It is not legal advice, and the position in any particular matter depends on its own facts and on the law as it stands at the time. Statutory references should be checked against the current text.