Dishonour of cheque for insufficiency, etc., of funds in the account
Section 138 of the Negotiable Instruments Act, 1881 deals with dishonour of cheque for insufficiency, etc., of funds in the account. [Where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid, either because of the amount of mone The Act came into force on 01 Mar 1882.
1[Where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall, without prejudice to any other provision of this Act, be punished with imprisonment for 2[a term which may be extended to two years], or with fine which may extend to twice the amount of the cheque, or with both:
Provided that nothing contained in this section shall apply unless--
(a) the cheque has been presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier;
(b) the payee or the holder in due course of the cheque, as the case may be, makes a demand for the payment of the said amount of money by giving a notice; in writing, to the drawer of the cheque, 3[within thirty days] of the receipt of information by him from the bank regarding the return of the cheque as unpaid; and
(c) the drawer of such cheque fails to make the payment of the said amount of money to the payee or, as the case may be, to the holder in due course of the cheque, within fifteen days of the receipt of the said notice.
Explanation.-- For the purposes of this section, debt of other liability means a legally enforceable debt or other liability.
Section 138, The Negotiable Instruments Act, 1881 (Act 26 of 1881).
Cross-references
Extracted from the operative text of the enactments themselves. Every destination below exists in our corpus.
Referred to by 10
- Goa Court-Fees Act s. 47 Repayment of fee in certain circumstances
- Goa Court-Fees Act s. 54 Repeal and savings
- Maharashtra Court-fees Act s. 43 Repayment of fee in certain circumstances
- s. 139 Presumption in favour of holder
- s. 140 Defence which may not be allowed in any prosecution under section 138
- s. 141 Offences by companies
- s. 142 Cognizance of offences
- s. 142A Validation for transfer of pending cases
- s. 143A Power to direct interim compensation
- s. 148 Power of Appellate Court to order payment pending appeal against conviction
Related judgements & precedents
These are some judgments that construed this section, and hold precedence value. They hold authority on how to read, interpret and use this section.
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Msr Leathers vs S. Palaniappan
Court's Decision & Legal Precedent
A prosecution based on second or successive dishonour of a cheque is permissible under Section 138 of the Negotiable Instruments Act, provided all three conditions precedent in the proviso to Section 138 are satisfied: (1) the cheque is presented within the validity period; (2) notice is given within 30 days of receiving information of dishonour; and (3) the drawer fails to make payment within 15 days of receiving notice. The failure to prosecute based on the first dishonour does not bar prosecution based on subsequent dishonours, as each dishonour that satisfies the statutory conditions constitutes a fresh cause of action. The holder of a cheque has the right to present it for encashment multiple times within its validity period, and each presentation and dishonour may give rise to separate criminal liability, independent of whether earlier defaults were prosecuted.
On this section: Court analyzed three conditions precedent for dishonour to constitute an offence: (1) cheque must be presented within six months from date of issue or validity period, whichever is earlier; (2) payee must send notice within 30 days of receiving dishonour information; (3) drawer must fail to pay within 15 days of receiving notice
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Dashrath Rupsingh Rathod v. State of Maharashtra
Court's Decision & Legal Precedent
The offence under section 138 NI Act is complete upon dishonour at the drawee bank. Territorial jurisdiction lies at that place. (Parliament later inserted s.142(2) by the 2015 amendment, so the territorial holding is partly superseded; the case remains teaching authority on the structure of the offence.)
On this section: Offence complete on drawee-bank dishonour; territorial jurisdiction there (partly superseded by 2015 amendment).
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Rangappa vs Sri Mohan
Court's Decision & Legal Precedent
The statutory presumption mandated by Section 139 of the Negotiable Instruments Act extends to include the existence of a legally enforceable debt or liability. This is a rebuttable presumption, and the standard of proof required for an accused to rebut this presumption is that of 'preponderance of probabilities.' The accused must raise a probable defence that creates reasonable doubts about the existence of a legally enforceable debt or liability - a mere plausible explanation is insufficient. The accused may rely on materials already submitted by the complainant and may not be required to adduce evidence of his own. Stop payment instructions on a post-dated cheque do not exempt the drawer from liability under Section 138 of the Act. The burden of proof is on the accused to demonstrate, on preponderance of probabilities, that the presumption does not apply to the specific facts of the case.
On this section: Dishonour of cheque for insufficiency of funds - core provision establishing criminal liability for cheque dishonour; clarified that stop payment instructions constitute dishonour; three ingredients identified: legally enforceable debt, cheque drawn on account for discharge of debt, dishonour of cheque.
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Sanjabij Tari v. Kishore S. Borcar
Court's Decision & Legal Precedent
Guidelines to reduce the backlog of section 138 NI Act complaints in metropolitan district courts.
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P. Mohanraj v. Shah Brothers Ispat Pvt. Ltd.
Court's Decision & Legal Precedent
Judgement order-22.pdf 2021-03-01. Nariman J. reportable (digitally signed 2021.03.01). DATE-CHECK false positive on supply/dishonour dates 2015–17 in the facts; body is the 2021 IBC-14/NI-138 judgment. Isolates IBC 14: a 138 proceeding against the corporate debtor is covered by the s.14 moratorium and stays during CIRP; the stay does not automatically extend to directors/persons in charge under 141. Existing combined rows already map this CNR to ni-act 138/141; this pass adds the IBC 14 row. Map insolvency-bankruptcy-code-2016 14 cited. Do not pad NI 138/141 (already filled). Not a new CNR.
On this section: s.138 proceeding against a corporate debtor is stayed by IBC s.14 moratorium.
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Madhav Saran Agarwal vs Msx Mall Pvt. LTD
Court's Decision & Legal Precedent
Section 138/141 proceedings under the Negotiable Instruments Act against a corporate debtor are covered by the moratorium provision in Section 14(1)(a) of the Insolvency and Bankruptcy Code, 2016, as such proceedings relate to transactions evidencing debt of the corporate debtor and result in depletion of its assets through compensation orders, thereby directly impacting the object of the moratorium which is to preserve the corporate debtor's assets during the insolvency resolution process so it can continue as a going concern and be rehabilitated. However, the moratorium applies only to the corporate debtor and not to natural persons (Directors/officers) in charge of and responsible for the conduct of the business of the corporate debtor, who remain liable to prosecution under Section 138/141 as the corporate debtor is a necessary party to such proceedings.
On this section: Core provision creating offence of cheque dishonour; analyzed to show its hybrid civil-criminal nature
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Naresh Kumar Gupta vs Sood Resins and Polymers
Court's Decision & Legal Precedent
Section 138/141 proceedings under the Negotiable Instruments Act against a corporate debtor are covered by the moratorium provision in Section 14(1)(a) of the Insolvency and Bankruptcy Code, 2016, as such proceedings are 'proceedings' within the meaning of that section. The moratorium applies only to the corporate debtor and not to natural persons (Directors and officers) who can continue to be prosecuted under Section 141 of the Negotiable Instruments Act. The rules of statutory construction (noscitur a sociis and ejusdem generis) cannot be applied to restrict the meaning of 'proceedings' in Section 14(1)(a) when the expression is designedly wide and the object of the statute is clear - which is to preserve the corporate debtor's assets during the insolvency resolution process.
On this section: Core provision creating quasi-criminal liability for cheque dishonour; analyzed to determine its nature and scope
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Devendra Kishanlal Dagalia vs Dwarkesh Diamonds PVT LTD
Court's Decision & Legal Precedent
Once a Magistrate has examined a complaint, taken cognizance of an offence, and issued summons under Section 204 Cr.P.C., the Magistrate cannot thereafter recall or review that order by invoking Section 201 Cr.P.C. (which applies only to cases where the Magistrate is initially not competent to take cognizance). Relief post-issuance of summons must be sought before the High Court under Section 482 Cr.P.C. or Article 227 of the Constitution. Additionally, a complaint under Section 138 N.I. Act is maintainable at any court having territorial jurisdiction over any location where any one of the five essential components of the offence (drawing, presentation, dishonour, notice, and non-payment within 15 days) occurred, and the complainant has discretion to choose such a court.
On this section: The provision criminalises dishonour of cheques. Court identified five essential components of the offence: (1) drawing of cheque, (2) presentation to bank, (3) return unpaid by bank, (4) written notice demanding payment, (5) failure to pay within 15 days. Held that all five components need not occur at same location; any one location where a component occurred can ground jurisdiction.
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Bridgestone India Pvt. LTD vs Inderpal Singh
Court's Decision & Legal Precedent
After the promulgation of the Negotiable Instruments (Amendment) Second Ordinance, 2015, territorial jurisdiction for criminal proceedings under Section 138 of the Negotiable Instruments Act, 1881, is determined by the place where the cheque is delivered for collection (i.e., the branch of the bank where the payee or holder in due course maintains the account) or where it is presented for payment (i.e., the branch of the drawee bank where the drawer maintains the account), not by the place where the cheque is drawn. The amended Section 142(2), through the non-obstante clause in Section 142A(1), overrides prior judgments and the general jurisdiction principles under Section 177 of the Criminal Procedure Code, 1973, and applies retrospectively to cases pending before the amendment came into force.
On this section: The primary provision under which cheque dishonour is criminalized. The Court examined the jurisdictional framework for prosecuting offences under this section.
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Bridgestone India PVT LTD vs Inderpal Singh
Court's Decision & Legal Precedent
After the promulgation of the Negotiable Instruments (Amendment) Second Ordinance, 2015, territorial jurisdiction for prosecuting an offence under Section 138 of the Negotiable Instruments Act, 1881, lies in the court within whose local jurisdiction the branch of the bank where the payee or holder in due course maintains an account is situated (i.e., where the cheque is delivered for collection), not where the cheque is drawn or where the drawee bank is located. The amended Section 142(2) and Section 142A(1) override the Criminal Procedure Code, 1973, and prior judgments, including Dashrath Rupsingh Rathod's case, and apply retrospectively to pending cases.
On this section: Defines the offence of cheque dishonour; the Court examined which court has jurisdiction to try this offence based on the place of dishonour.
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Mainuddin Abdul Sattar Shaikh vs Vijay D Savli
Court's Decision & Legal Precedent
The drawer of a dishonoured cheque is solely and personally liable under Section 138 of the Negotiable Instruments Act, 1881, irrespective of whether the cheque was drawn on a personal account or for discharging company obligations. The liability is determined by strict interpretation of the statutory provision, which makes the drawer alone liable for the offence. Criminal and quasi-criminal provisions must be strictly construed, and proceedings cannot be used to impose liability on persons not intended by the statute to be liable. A Managing Director or Joint Managing Director need not be specifically averred in the complaint to be incharge of and responsible for company affairs; their position itself establishes this fact, making them liable under Section 138 even when the company is not a party.
On this section: Primary section under which the liability for cheque dishonour is established. Court held that the drawer of the cheque alone is liable under this section, and the liability is determined by strict interpretation of the statutory text requiring the drawer to draw cheque on account maintained by him with a banker for payment to another person for discharge of debt or liability.
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Jik Industries Ltd. vs Amarlal V. Jumani
Court's Decision & Legal Precedent
Approval and sanction of a scheme of compromise and arrangement under Section 391 of the Companies Act, 1956 does not have the effect of automatically compounding an offence under Section 138 read with Section 141 of the Negotiable Instruments Act, 1881. The offence, if committed prior to the scheme, does not stand automatically compounded by virtue of the scheme sanction. Compounding of criminal offences, including those under the NI Act, requires the explicit consent of the complainant or person aggrieved, and this consent cannot be assumed or implied from the sanction of a corporate restructuring scheme. The statutory procedure for compounding prescribed in Section 320 of the Criminal Procedure Code, 1973 applies to compounding of NI Act offences despite the non obstante clause in Section 147 of the NI Act, as Section 147 only makes offences compoundable but does not prescribe the mode and manner of such compounding.
On this section: Core offence provision for cheque dishonour; Court held that offence committed prior to scheme cannot be automatically compounded by scheme sanction
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Jugesh Sehgal vs Shamsher Singh Gogi
Court's Decision & Legal Precedent
Where a complaint under Section 138 of the Negotiable Instruments Act discloses from its own pleadings that the cheque was not drawn on an account maintained by the accused, thereby failing to satisfy the first essential ingredient of the statutory offence, the continuance of proceedings constitutes an abuse of the court process and the High Court should exercise its inherent jurisdiction under Section 482 CrPC to quash such complaint, as the case against the accused cannot be proved regardless of evidence led at trial.
On this section: Interpreted and applied to establish that the cheque must be drawn on an account maintained by the accused drawer. The court enumerated six cumulative ingredients required for prosecution under this section, including that the cheque must be drawn on an account maintained by the person and for discharge of liability from that account. The court held that absence of this fundamental ingredient meant the complaint could not succeed.
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Dinesh Prasad vs Nitesh Kumar Sharma
Court's Decision & Legal Precedent
When a complaint under Section 138 of the Negotiable Instruments Act is filed during a period when the Supreme Court has extended the limitation period through a Suo Motu order (as was done during the COVID-19 pandemic from March 15, 2020 to February 28, 2022), the trial court must take judicial notice of such extension order and cannot hold the complaint to be barred by limitation if it was filed within the extended period. The trial court's failure to consider such a binding Supreme Court order and acquitting the accused solely on the ground of limitation, without examining the merits of the case, constitutes an error of law that warrants interference by the appellate court.
On this section: Cheque dishonour offense - the primary substantive charge against the accused for issuing cheques that bounced due to insufficient funds
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M/S. SAMPATI SECURITIES LIMITED AUTHORIZED PERSON OF JIGARKUMAR NARMADA SHANKAR RAVAL vs SHIVAM GOYAL
Court's Decision & Legal Precedent
When an affidavit in support of a complaint under Section 145(1) of the NI Act is filed, separate verification of the complainant under Section 200 of the CrPC is not mandatory for issuing process.
On this section: Substantive offense of cheque dishonor.
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VISHALKUMAR MAHWSHBHAI PATEL vs HITESHKUMAR DHARMENDRABHAI KALYANI
Court's Decision & Legal Precedent
In a trial under Section 138 of the Negotiable Instruments Act, 1881, if the complainant proves the core foundational facts of execution, dishonour, and service of statutory demand notice, the statutory presumption of debt under Section 139 remains mandatory and binding unless the accused adduces sufficient rebuttal evidence on a standard of preponderance of probabilities.
On this section: Offence of dishonour of cheque for insufficiency of funds.
The holding above is the ratio decidendi as extracted from the judgment by eCourts India, reproduced unaltered — it is a rendering of the court's reasoning, not a substitute for its words. Read the order itself before relying on it.
Judgments citing this section
These may be obiter dicta or a precedent, for you to study. These are the judgments where this section is quoted.
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… The cheques which were handed over by Laksheshbhai Patel to the petitioner herein were presented for realisation and some of the cheques came to be dishonoured. The petitioner, therefore, instituted several complaints against the said Laksheshbhai under Section 138 of the Negotiable Instruments Act, 1881 which later on came to be withdrawn by the petitioner. In the aforesaid FIR by respondent no.2 herein, it is alleged that the petitioner herein had hatched a conspiracy with the coaccused- court employees to extract money from the defendant of the suit. The co-accused had …
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… The learned counsel for ESIC also drew the Court's attention to a judgment of the Madras High Court in Pentafour Products Ltd. v. Union of India , 2005 SCC Online Mad 841 , wherein the issue pertained to the applicability of Section 138 of the Negotiable Instruments Act, 1881 vis-à-vis Sections 22(1)[4]( page-9-0) and 22A[5]( page-9-1) of the Sick Industrial Companies (Special Provisions) Act, 1986. The Madras High Court ruled that an order declaring a company sick under the Sick Industrial Companies (Special Provisions) Act, 1986 did not …
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… All these appeals are filed against the orders passed by different High Courts, which dismissed the petitions filed under Section 482 of the Criminal Procedure Code, 1973[1]( page-4-0) and thereby affirmed the orders passed by the trial Court rejecting the applications filed for staying the proceedings under Section 138 of the Negotiable Instruments Act, 1881[2]( page-4-1) , sine die till the conclusion of the proceedings initiated under Section 94 of the Insolvency and Bankruptcy Code, 2016[3]( page-4-2) , before the National Company Law Tribunal. A writ petition has also been filed for declaration and direction that section 138 …
Questions about Section 138
What have the courts held on Section 138 of the Negotiable Instruments Act?
Msr Leathers vs S. Palaniappan (10 Sep 2013) is the leading judgment on this section among those set out below: Court analyzed three conditions precedent for dishonour to constitute an offence: (1) cheque must be presented within six months from date of issue or validity period, whichever is earlier; (2) payee must send notice within 30 days of receiving dishonour information; (3) drawer must fail to pay within 15 days of receiving notice. Another 15 judgments on this section are set out below, 13 of them from the Supreme Court. They run from 2009 to 2026.
How do I find court cases under Section 138 of the Negotiable Instruments Act?
In judgments and charge sheets this section is written several ways, and each form finds a different set of orders. These search the full text of every order eCourtsIndia holds, best matches first: NI Act 138, section 138 NI Act, section 138 of the Negotiable Instruments Act. People searching for it also type ni act 138 punishment and ni act 138 procedure. Each opens the full list of orders on eCourtsIndia, where it can be narrowed by court, year and outcome. 16 reported judgments on this section are set out on this page, beginning with Msr Leathers vs S. Palaniappan (10 Sep 2013).
What should I read with Section 138 of the Negotiable Instruments Act, and has it changed?
10 other provisions in this corpus refer back to it.
When did Section 138 of the Negotiable Instruments Act come into force?
Section 138 of the Negotiable Instruments Act, commonly called cheque bounce, bounced cheque or cheque dishonour, and cited as NI Act 138, came into force on 01 Mar 1882, having been enacted on 09 Dec 1881. It is in force as at the date shown on this page.
Other sections of this Act
Source and method. Compiled from the enactments of Parliament and of the State legislatures as published on India Code, and republished together with commentary and other original matter under section 52(1)(q)(ii) of the Copyright Act, 1957. Structured, cross-referenced and maintained by eCourtsIndia. Text as in force on 14 Oct 2026. This page is not a substitute for legal advice.