Branch Stories: names and personal details have been changed. Based on situations we see in Indian bank branches.
Anil ran a small printing press. Wedding cards, visiting cards, school diaries. Good worker, terrible with paperwork. He came to my desk with a white envelope and a worried face.
“Sir, legal notice aaya hai. Section 138. Mujhe jail ho jayegi kya?”
How it started
Two months earlier, he had bought paper worth ₹1.8 lakh from a supplier and given a post-dated cheque. On the cheque date, his account had only about ₹1.2 lakh. A school had delayed his payment.
The cheque came back “Funds insufficient”. Our bank debited a return charge. The supplier called, angry. Anil said, “Present it again next week, I’ll arrange.”
The supplier presented it again. Anil had forgotten to check the balance after paying staff salaries. It bounced again.
Ten days later, the supplier’s lawyer sent a notice under Section 138 of the Negotiable Instruments Act.
What Section 138 means, in simple words
I explained it calmly, because panic doesn’t help:
- When a cheque given to pay a debt bounces for insufficient funds, the person who received it can send a legal notice within 30 days of getting the bank’s return memo.
- The person who gave the cheque then has 15 days from receiving the notice to pay the amount.
- If payment is not made within those 15 days, the receiver can file a criminal complaint in court. The law provides for imprisonment of up to two years, or a fine up to twice the cheque amount, or both.
“So the most important thing,” I told him, “is these 15 days. Pay within the time, and get proof.”
What he did
- He spoke to the supplier directly and apologised.
- He arranged the money by breaking a small FD, and paid the full ₹1.8 lakh by bank transfer within the notice period, so there was a clear record.
- He sent a written reply with the payment proof, and got a written acknowledgement from the supplier that the dues were settled.
- On my advice, he also spoke to a lawyer to make sure the reply was proper.
The matter ended there. It cost him two return charges, a lawyer’s fee, an FD and a lot of sleep.
What went wrong
- A post-dated cheque was given without planning for the money on that date.
- He agreed to a second presentation without checking his balance.
- No buffer in the business account for delayed payments.
Banker’s advice
- Never issue a cheque you can’t honour on its date. A bounced cheque is a legal matter, not just a bank charge.
- Keep a list of post-dated cheques you have given, with dates and amounts, and check the balance a day before.
- If money is short, talk to the payee before the date and agree on a new arrangement in writing.
- If you receive a Section 138 notice, act within 15 days: pay, keep proof and consult a lawyer.
- Repeated cheque bounces can affect your banking relationship. Banks may restrict cheque facilities.
- For businesses, keep an overdraft or cash credit limit as a buffer for delayed receivables.
Anil now keeps a small register on his desk titled “Cheques diye”. He showed it to me proudly the next time. Paperwork had finally won.
This story is for general awareness and is not legal advice. For a specific case, please consult a lawyer.