Cheque bounced? What to do, step by step

When a cheque bounces, your bank gives you a return memo with the reason. “Funds insufficient” or “exceeds arrangement” are the classic cases under Section 138 of the Negotiable Instruments Act, 1881. Other reasons, like a signature mismatch or a stop-payment instruction, can need different handling — ask a lawyer.

Section 138 also needs the cheque to have been given for a debt or liability that's legally owed, and presented while it was still valid — generally within three months of the date on it.

The deadlines below are strict, and courts count them carefully. Note the date you received the return memo; everything runs from there.

Within 30 days of the bank informing you that the cheque was returned, send the person who gave it a written notice demanding payment of the cheque amount.

• Send it by registered post or speed post, so you have proof of when it was sent and delivered. Many people also send it by email.
• Keep a copy of the notice, the postal receipt and the tracking record.
• Most people have a lawyer draft it: the notice has to say the right things to support a complaint later.

The person who issued the cheque has 15 days from receiving your notice to pay. If they pay in full, the matter usually ends there.

Don't file a complaint before those 15 days are up. A complaint filed early is premature and can be thrown out.

If they don't pay within the 15 days, you have one month after that period ends to file a complaint before the magistrate with jurisdiction.

A court can accept a late complaint if you show good reason for the delay, but don't count on it — plan to file in time.

Under Section 138, the offence can be punished with a fine of up to twice the cheque amount, imprisonment of up to two years, or both. Many cases settle long before that, often soon after the notice arrives.

• The original bounced cheque.
• The bank's return memo.
• A copy of your demand notice, the postal receipt and proof of delivery.
• Proof of the debt the cheque was for: an agreement, invoices, a loan record, or messages and emails.

A Section 138 complaint isn't your only route. You can also file a civil suit to recover the money, or settle — on paper — directly with the other side. Which is best depends on the amount, the evidence and how quickly you need the money back.

A lawyer can look at your documents, check your deadlines and tell you which route makes sense.