Introduction
A cheque, by its very nature, constitutes an unconditional undertaking to pay a certain sum of money. Where that undertaking is not honoured, the law does not regard the default as a private matter to be resolved solely between the parties concerned. Section 138 of the Negotiable Instruments Act, 1881 ("the NI Act") renders the dishonour of a cheque drawn in discharge of a legally enforceable debt or liability a criminal offence, exposing the drawer to imprisonment of up to two years, a fine extending to twice the amount of the cheque, or both.
The provision was introduced by the 1988 amendment with the specific object of preserving the credibility of cheques as an instrument of commerce and of discouraging their issuance without due regard to consequence. Its practical effect is that a person who draws a cheque assumes a liability that extends well beyond a civil claim for recovery: they render themselves liable to prosecution.
Elements of Liability and the Procedural History of Section 138
Four conditions must be cumulatively satisfied for the offence to be made out: the cheque must have been drawn for a legally enforceable debt; it must be presented within its validity period; it must be returned unpaid, typically for "insufficient funds"; and the payee must issue a written demand notice within 30 days of the dishonour memo, calling on the drawer to pay within 15 days. Only if that payment is not made does the cause of action arise, and the complaint must then be filed within one month under Section 142.
The Supreme Court has treated the notice requirement as substantive rather than formal. In Suman Sethi v. Ajay K. Churiwal, (2002) 2 SCC 380, it held that the notice must clearly demand the exact cheque amount, though interest or costs may be added so long as that amount remains distinctly identifiable — a position reaffirmed in 2025 in Kaveri Plastics v. Mahdoom Bawa Baharudeen Noorul, where even an inadvertent mismatch between the cheque amount and the amount demanded was held fatal to the complaint.
The machinery for enforcing these ingredients has been rebuilt in stages. Under the 1988 scheme, Sections 138–142 said nothing about trial procedure, so complaints proceeded as ordinary criminal trials under the Code of Criminal Procedure, 1973 ("CrPC") — slow, and the chief cause of the backlog that followed. The 2002 amendment introduced a dedicated summary-trial track through Sections 143–147: courts were directed to conclude trials within six months, complainant evidence could be given on affidavit, the bank's dishonour memo became presumptive proof of dishonour, and offences were made compoundable even after conviction.
The 2018 amendment added Sections 143A and 148 as relief against appellate delay: interim compensation of up to 20% of the cheque amount before conviction, and a mandatory deposit of at least 20% of the fine or compensation before an appeal against conviction is heard. The Supreme Court in G.J. Raja v. Tejraj Surana held that Section 143A operates only prospectively, while in Surinder Singh Deshwal v. Virender Gandhi it held Section 148 applies even to pre-2018 complaints, since it regulates an existing right of appeal rather than creating a new liability. Jamboo Bhandari v. M.P. State Industrial Development Corporation later clarified that while the Section 148 deposit is ordinarily mandatory, the "may" in Section 143A preserves real judicial discretion.
Most recently, the Bharatiya Nagarik Suraksha Sanhita, 2023 replaced the CrPC for offences committed, so every procedural cross-reference in Sections 143 to 148 now attaches to the equivalent BNSS provision — a correspondence the Supreme Court has already applied in recent transfer petitions, without any separate amendment to the NI Act itself.
Underpinning this evidentiary and procedural framework is a further statutory advantage in the complainant's favour: the reverse onus that Section 139 places on the accused. In Rangappa v. Sri Mohan, (2010) 11 SCC 441, the Supreme Court held that the presumption extends to the existence of a legally enforceable debt itself, rebuttable by the accused on a preponderance of probabilities rather than proof beyond reasonable doubt. In Basalingappa v. Mudibasappa, (2019) 5 SCC 418, it clarified that a probable defence may be raised through cross-examination alone, without independent evidence — for instance, by questioning the complainant's financial capacity to advance the claimed loan. Read with Kumar Exports v. Sharma Carpets, (2009) 2 SCC 513, these rulings keep the presumption from hardening into strict liability.
This statutory architecture is completed by the rules governing where such a complaint may be filed. Jurisdiction under Section 138 has moved through a single, connected line of correction. Payees once enjoyed wide latitude in choosing the forum under the multiple-cause-of-action approach in K. Bhaskaran v. Sankaran Vidhyan Balan, (1999) 7 SCC 510. The Supreme Court curtailed that latitude in Dashrath Rupsingh Rathod v. State of Maharashtra, (2014) 9 SCC 129, confining jurisdiction to the court where the drawee bank is situated and applying the ruling retrospectively, which in turn triggered the transfer of lakhs of pending cases. Parliament responded by inserting Section 142(2) through the 2015 amendment, restoring jurisdiction to the court where the payee's bank branch is located — a correction the Supreme Court endorsed in Bridgestone India (P) Ltd. v. Inderpal Singh, (2016) 2 SCC 75, and has since applied consistently, most recently holding in the Jai Balaji Industries Ltd. v. M/s HEG Limited (2025 INSC 1362) transfer petitions that a cheque collected at a different branch of the same bank is still deemed delivered at the payee's home branch for jurisdictional purposes.
Each step in this line — judicial expansion, judicial contraction, legislative restoration, and judicial endorsement — responds directly to the one before it.
This architecture continues to evolve. 2025 alone produced further doctrinal movement from the Supreme Court. In Dhanasingh Prabhu v. Chandrasekar 2025 INSC 831, it held that a complaint is maintainable even where only the partners of a firm, and not the firm itself, are arraigned as accused. In Celestium Financial v. A. Gnanasekaran, 2025 INSC 804, it held that a Section 138 complainant qualifies as a "victim" under Section 2(wa) CrPC, entitled to appeal an acquittal without seeking special leave. Most recently, in Sumit Bansal v. MGI Developers & Promoters, 2026 SCC OnLine SC 49, it confirmed that multiple cheques dishonoured from a single transaction give rise to independent causes of action, permitting parallel complaints.
Conclusion
Section 138 sits at an unusual intersection of commercial convenience and criminal sanction. A bare four-section offence in 1988 grew into a dedicated summary-trial regime in 2002, gained a compensation-before-conviction mechanism in 2018, and now operates under an entirely new criminal procedure code. Jurisdiction has swung and been legislatively restored, and appellate remedies continue to be reshaped by the Supreme Court. What remains constant is the underlying philosophy: cheques must be honoured, and the person who signs one — carrying the risk of dishonour — cannot treat it as a purely civil gamble.