EMI cheque or NACH bounce: Section 138 notice, the 15-day window and how to respond

If a cheque you gave a lender bounces for insufficient funds, the lender can send you a written demand notice within 30 days of learning of the dishonour. This includes post-dated EMI cheques and security cheques. You then have 15 days from receiving the notice to pay the cheque amount. If you do not pay, the lender can file a criminal complaint under Section 138 of the Negotiable Instruments Act, 1881 within one month. The court can impose imprisonment of up to two years, a fine of up to twice the cheque amount, or both. The court can also order interim compensation of up to 20% of the cheque amount during the case. A failed NACH or ECS mandate can lead to a similar complaint under Section 25 of the Payment and Settlement Systems Act, 2007. The 15-day window is the most important deadline. Paying, or agreeing a written settlement, within it stops the offence arising.

This guide is part of debt settlement mistakes. It is general information, not legal advice.

The Section 138 timeline

Step	Time limit	Notes
Cheque presented	Within its validity period, usually 3 months from its date	Post-dated cheques are valid from the date written on them
Cheque returned unpaid	–	"Funds insufficient" or "exceeds arrangement"; courts have also treated "payment stopped" and "account closed" as covered in many cases
Lender sends written notice	Within 30 days of receiving information of the dishonour	By post, courier or other modes courts accept
You pay the cheque amount	Within 15 days of receiving the notice	Paying here means no offence is made out
Complaint filed	Within one month after the 15 days end	Courts can condone delay for sufficient cause
Trial	Usually summary trial before a magistrate	Takes months to years

What the law requires

For a Section 138 offence, broadly:

The cheque was issued for a legally enforceable debt or liability.
It was presented within its validity.
It bounced for insufficient funds or because it exceeded the arrangement.
A written notice was sent in time.
The amount was not paid within 15 days of receipt.

Security cheques. Courts have held that a cheque given as security can still attract Section 138 if the debt was legally due when it was presented. Whether a particular cheque qualifies depends on the facts. Take advice rather than assuming "it was only security".

Section 139 presumption. The court presumes the cheque was for a debt, unless you prove otherwise. Simply denying the debt is not enough.

Penalties and orders the court can make

Provision	What it allows
Section 138	Imprisonment up to 2 years, fine up to twice the cheque amount, or both
Section 143A	Interim compensation of up to 20% of the cheque amount, payable during trial
Section 148	On appeal against conviction, the appellate court can order a deposit of at least 20% of the fine or compensation
Section 147	The offence is compoundable: it can be settled between the parties, with the court's permission

Courts have issued guidelines on when compounding is allowed and on the costs payable at different stages of a case. Settling early is generally cheaper. Ask your lawyer about the current guidelines.

NACH, ECS and auto-debit failures

Most EMIs are now collected by NACH mandate. If a mandate debit fails for insufficient funds, the lender can charge a bounce charge as disclosed in your key fact statement. A failed electronic transfer can also lead to a complaint under Section 25 of the Payment and Settlement Systems Act, 2007, which follows a notice-and-payment structure similar to Section 138. Lenders more often pursue civil recovery for NACH failures, but do not rely on that.

Worked example (illustrative)

EMI cheque of ₹14,500 bounces on 5 August
Bank charges: ₹500 + 18% GST = ₹590 bounce charge on your account, plus the lender's own bounce fee
Lender's notice received on 25 August
15-day window ends on 9 September

If you pay ₹14,500 to the lender by 9 September, no Section 138 offence arises for that cheque. Keep the receipt and a copy of the notice. The overdue EMI, penal charges and credit report entry still follow under the loan terms.

If you cannot pay the full ₹14,500, write to the lender before 9 September. Offer what you can, ask for restructuring, and request that it not present further cheques. A written agreement protects you better than a promise on the phone.

If you have several post-dated cheques with a lender

Ask the lender to return unused cheques and switch to a NACH mandate you can manage, or to a revised schedule.
Do not issue new cheques you know will bounce.
Keep enough in the account before each presentation date, or talk to the lender before it.
On settlement, make sure the letter says that all cheques will be returned or cancelled and no complaint will be filed. See the settlement letter checklist.

If a complaint has already been filed

Do not ignore the summons. If you do not appear, a warrant can be issued.
Get a lawyer, or free legal aid if you qualify. See free legal aid.
Consider settlement or compounding. Many cheque cases are settled, including through Lok Adalats. See DRT and Lok Adalat.
Raise valid defences, such as no debt due, cheque misused, notice defective or complaint out of time, with your lawyer.

When to consult a professional

As soon as you receive a Section 138 notice, and certainly before the 15 days end. The notice decides whether a criminal case can be filed.

Frequently asked questions

Can I stop payment on a cheque to avoid a case?

Stopping payment does not automatically avoid Section 138. Courts have treated stop-payment cases as covered where funds were insufficient or the debt was due. Talk to the lender instead.

Does paying after 15 days end the case?

Not automatically, but a settlement can lead to compounding with the court's permission. Earlier is cheaper.

Is a missed EMI without a cheque a criminal offence?

No. A missed EMI on its own is a civil matter. Criminal liability arises from specific acts, such as a cheque bounce left unpaid after notice, or fraud.

Can the lender file cases for each bounced cheque?

Each dishonoured cheque can give rise to a separate complaint. Settle all of them together in writing.

Sources

India Code: Negotiable Instruments Act, 1881 and Payment and Settlement Systems Act, 2007
Reserve Bank of India: cheque validity and NACH rules
National Legal Services Authority: free legal aid and Lok Adalats