Section 138 of the Negotiable Instruments Act, 1881 provides a penal remedy when a cheque issued towards discharge of a legally enforceable debt is returned unpaid by the bank due to insufficient funds.
1. The 30-Day Statutory Demand Notice
Upon receiving the cheque return memo from your bank, you must issue a written legal demand notice to the drawer within 30 days. The drawer is granted 15 days from receipt of notice to make payment.
"Section 138 requires that a demand for payment must be made in writing within thirty days of the receipt of information by the holder from the bank regarding the return of the cheque."
2. Filing the Criminal Complaint
If payment is not remitted within the 15-day notice window, the payee must file a formal criminal complaint before the Metropolitan Magistrate within 30 days of the cause of action arising.
3. Interim Compensation under Section 143A
Courts may order the drawer to deposit interim compensation up to 20% of the cheque amount during trial, securing immediate financial relief for the complainant.
Summary & Next Steps
Adhering strictly to statutory limitation periods is crucial, as any unexcused delay can bar court remedy.