Section 138 NI Act — Drawer's Guide

Acting for the Accused

The statutory presumption starts against your client once the signature is admitted, so the defence has to be built early and with documents. Most wins come from a break in the statutory sequence or from a concrete rebuttal, not from denial.

First 15 days

When the notice arrives

Do not ignore the notice

Silence can support an adverse inference, as the Supreme Court said in 2025. Reply within the 15 days with the defences you will actually run, stated precisely. A reply is also where you fix your client's version before the complaint is drafted.

Decide whether to pay

Paying the cheque amount within 15 days of receipt removes the offence. If the debt is real and the risk of a conviction is not worth carrying, pay by demand draft or transfer and get written acknowledgement. If the demand is inflated, pay the undisputed cheque amount and dispute the rest in the reply.

Audit the notice and the sequence

Run the dates against what the payee claims. Check where the notice was sent, when it was received, and exactly what it demanded.

Defences

Procedural first, then substantive

Procedural and technical

Cheque presented after three months or after its validity.
Notice sent more than 30 days after the return memo.
Notice demands an amount other than the cheque amount, or lumps it with other claims.
Notice never reached the drawer because of a wrong address. A refusal or an unclaimed envelope will usually count as service, so check the postal endorsement.
Complaint filed before the 15 days ended, or after one month with no condonation.
Wrong territorial jurisdiction.
Complainant is not the payee or holder in due course, or an attorney with no personal knowledge pursued it.
Cheque was drawn on a joint account and not every account holder is liable, or the accused is not the signatory.

Company and director liability (s.141)

Company not impleaded. A director cannot be convicted without the company being an accused.
No averment that the director was in charge of and responsible for the business at the time. Non-executive and nominee directors have the strongest case.
Signatories are liable under s.138 itself, so a signatory's defence rests on facts, not on s.141.
Insolvency of the company: the moratorium under s.14 IBC stops proceedings against the corporate debtor but not against the directors or signatories.

Substantive

No legally enforceable debt on the cheque date, or the debt was time-barred or the consideration illegal.
Debt already paid, adjusted or set off, in full or in part.
Cheque given as security. This works only if the debt had not crystallised when it was presented. Where the underlying debt matured, the security label does not help.
Blank signed cheque misused. The presumption still applies to a signed blank cheque handed over voluntarily, so you need proof of how it was filled and why.
Cheque lost, stolen, or obtained by fraud or coercion, with a police complaint or stop-payment instruction made at the time.

Complainant's financial capacity

Running the trial

Appearance and bail

Appear through counsel and seek exemption under s.205 CrPC (s.228 BNSS) where you can. The offence is non-cognizable and bailable, so a bail bond is the usual step. Consider whether the complaint can be challenged at the threshold. The Supreme Court held in April 2026 that merits defences such as no debt on the cheque date are tried, not decided when process is issued, so quashing is realistic only for patent defects like time-bar, no notice, or no jurisdiction.

Plea and notice of accusation (s.251)

The court puts the accusation and asks for a plea. The 2025 guidelines call for structured questioning at this stage, so state your defence in concrete terms. Plead not guilty and claim trial if you contest.

Oppose interim compensation (s.143A)

Up to 20 percent of the cheque amount can be directed to be paid in 60 days. The Supreme Court has read this as directory, so the court should weigh the facts. Point to a prima facie defence, a reply to the notice, and hardship. Order costs and the instalment structure are negotiable.

Cross-examine the complainant

Source and date of the money, and the complainant's own tax and bank records. Gaps between the notice, the complaint and the affidavit on dates, amounts and the reason for the debt. The absence of any agreement, receipt or message for the supposed transaction. For a security cheque, the date and terms of the real arrangement. Rebuttal can rest on the complainant's own evidence and does not always need your client in the witness box. A bare denial will not do it, as the Supreme Court restated in August 2026.

Accused's statement and defence evidence

The statement under s.313 CrPC (s.351 BNSS) must address each incriminating circumstance, including the signature and the notice. Lead defence evidence where it matters: bank officials, payment proofs, witnesses to the real arrangement. Bank evidence can be taken by affidavit and summoned under s.145(2).

Settling and compounding

Section 147

Compounding is allowed at any stage, including after conviction with the court's leave. Costs rise the later it comes, and the 2025 guidelines revised the percentages downward. A settlement that pays the cheque amount, agreed interest and costs on a fixed date usually ends the case. Make the consent terms say that the complaint is withdrawn or compounded on payment, and get the cheque and notice papers back where possible.

If convicted

Exposure and remedies

Exposure

Up to two years, fine up to twice the cheque amount, plus compensation. Do not assume a revision court will cut the sentence. In April 2026 the Supreme Court set aside a High Court order that had reduced a conviction to payment of the cheque amount alone.

Appeal

Facing a Section 138 complaint?

Mr. Mehandru builds defence strategy from the moment the notice arrives.