Section 138 NI Act
What happens if my cheque bounces because I don’t have enough money?
Short answer
If your cheque bounces for insufficient funds, you can be prosecuted and may face up to two years in jail, a fine up to twice the cheque amount, or both, provided certain steps are followed.
In detail
If a cheque you wrote is returned unpaid because there isn’t enough money in your account or because it exceeds a pre‑arranged limit, you can be treated as having committed a criminal offence. The law says this will only apply if three conditions are met. First, the cheque must be presented to the bank within six months of its date or before it expires, whichever comes first. Second, the person who received the cheque must send you a written demand for payment within 30 days after the bank tells them the cheque was unpaid. Third, you must not settle the amount within 15 days after receiving that notice. If all these steps occur, you may be sentenced to up to two years in prison, fined up to twice the cheque’s value, or both. The penalty is in addition to any other civil actions the payee might take to recover the money.
Related questions
When I get a cheque, does the law assume it’s to pay my debt?
Yes, the law presumes the cheque is for settling a debt unless someone proves otherwise.
What default assumptions does the law make about a cheque or other negotiable instrument?
The law assumes the instrument was made for value, dated correctly, accepted promptly, transferred before it matures, endorsed in order, properly stamped if lost, and that the holder is a holder in due course, unless proven otherwise.
Can I still file a case for a bounced cheque after the one‑month deadline?
You must file a written complaint within one month, but the court may accept a later filing if you show a good reason.
If my company bounces a cheque, can its managers be held criminally liable?
Yes, managers who were in charge of the business at the time can be treated as guilty unless they prove they didn’t know and exercised due diligence.
Not legal advice. This is general legal information, not legal advice. Laws change and every case turns on its own facts — speak to a lawyer about your situation.