Section 138: Ingredients of the Offence

Section 138 is a carefully built offence. It is not committed merely because a cheque bounces. The prosecution must establish a sequence of facts: a cheque drawn on the accused's own account, for a legally enforceable debt, presented in time, returned for want of funds, followed by a written demand within 30 days and a failure to pay within 15 days. This note sets out the section and each ingredient, with the leading cases.

1. The Section

The proviso states that nothing in the section applies unless (a) the cheque has been presented within six months of its date or within its period of validity, whichever is earlier; (b) the payee or holder in due course makes a written demand for payment within 30 days of receiving information from the bank of the dishonour; and (c) the drawer fails to pay within 15 days of receiving the notice. The Explanation defines "debt or other liability" as a legally enforceable debt or other liability.

2. The Ingredients

In Kusum Ingots and Alloys v. Pennar Peterson Securities (Supreme Court, 2000), the Court identified the ingredients. Restated:

1. a person drew a cheque on an account maintained by him with a banker;
2. for payment of money to another person, for the discharge of a legally enforceable debt or other liability, in whole or in part;
3. the cheque was presented within six months or its validity, whichever is earlier;
4. it was returned unpaid because the funds were insufficient or it exceeded the arrangement with the bank;
5. the payee or holder in due course gave written notice demanding payment within 30 days of information of dishonour;
6. the drawer failed to pay the amount within 15 days of receipt of the notice.

The offence is complete only when all these occur. The cause of action arises on the expiry of the 15 days (Topic 44).

3. "Drawn by a Person on an Account Maintained by Him"

• Own account: the cheque must be drawn on an account maintained by the accused. A person who issues a cheque on someone else's account is not liable under Section 138 (Jugesh Sehgal v. Shamsher Singh Gogi, 2009), though he may be liable for cheating.
• Only the drawer: in a joint account, only the holder who signed the cheque is liable, not the other account holders (Aparna A. Shah v. Sheth Developers, 2013).
• Companies and firms: where the account belongs to a company or firm, liability of those in charge arises through Section 141 (Topic 46).
• Third-party debts: the debt need not be the drawer's own; a cheque given by a guarantor for another's debt is covered (I.C.D.S. Ltd. v. Beena Shabeer, 2002).

4. Presentation

• Period: within six months of the date of the cheque or its validity, whichever is earlier. Since 1 April 2012, RBI has limited validity to three months, which therefore governs (Topic 8).
• Post-dated cheques: the period runs from the date written on the cheque (Anil Kumar Sawhney v. Gulshan Rai, 1993).
• Successive presentation: a cheque may be presented any number of times within its validity, and the payee may issue notice and prosecute on any dishonour, provided the earlier one was not followed by a completed cause of action and complaint (MSR Leathers v. S. Palaniappan, 2013, overruling Sadanandan Bhadran, 1998).
• Several cheques: where several cheques arise from one transaction, each dishonour gives a separate cause of action, and separate complaints are maintainable (Sumit Bansal v. MGI Developers and Promoters, Supreme Court, 2026).

5. Reasons for Return

The section names two reasons: insufficient funds and exceeds arrangement. The courts have read these purposively:

• "Payment stopped by drawer": covered, unless the drawer shows that he had sufficient funds and a valid reason to stop payment (Modi Cements v. Kuchil Kumar Nandi, 1998).
• "Account closed": covered, as a species of insufficiency (NEPC Micon v. Magma Leasing, 1999).
• "Signature differs", "image not found", "drawer's signature incomplete" and similar: may attract Section 138 where the drawer deliberately caused the dishonour; the presumption under Section 139 applies and the accused must show a legitimate cause (Laxmi Dyechem v. State of Gujarat, 2012).
• Wrongful dishonour by the bank: no offence where funds were in fact sufficient (Topic 37).

6. Notice and Failure to Pay

The written demand must be sent within 30 days of the payee receiving the bank's information of dishonour, and must demand the cheque amount. The drawer then has 15 days from receipt to pay. Payment within that time prevents the offence altogether. These requirements, and the rules on deemed service, are explained in Topic 44.

7. Punishment

• Imprisonment up to two years (raised from one year in 2002), or
• Fine up to twice the cheque amount, or both.
• Courts commonly direct that the fine, or a large part of it, be paid to the complainant as compensation, and may order compensation under the general criminal procedure law (Topic 21).
• The Probation of Offenders Act, 1958 may be applied in suitable cases (Sanjabij Tari, 2025).

8. Related Topics and Provisions

• Legally enforceable debt (Topic 43)
• Notice and deemed service (Topic 44)
• Presumption under Sections 139 and 140 (Topic 45)
• Companies and directors (Topic 46)