Section 138 Notice for an EMI Cheque or ECS Bounce: What It Means and What to Do
If a cheque you gave your lender bounced, or an auto-debit (ECS or NACH mandate) for your EMI failed, you may receive a legal notice that mentions Section 138 of the Negotiable Instruments Act, or Section 25 of the Payment and Settlement Systems Act. These notices sound frightening, and many borrowers panic or ignore them. Both reactions can make things worse. This guide explains what the notice actually means, the deadlines that matter, and the practical ways to respond.
What is a Section 138 notice?
Section 138 of the Negotiable Instruments Act, 1881 makes it an offence when a cheque given to pay a legally enforceable debt is returned unpaid, for example because of insufficient funds. Before any case can be filed, the lender must send you a written demand notice. That notice is what you have received.
For electronic payments, Section 25 of the Payment and Settlement Systems Act, 2007 works in almost the same way. It covers a failed electronic debit, such as an EMI auto-debit through an ECS or NACH mandate, when the account does not have enough money.
The timeline that matters
Under Section 138, the process follows fixed steps:
The cheque must be presented while it is valid, which is generally three months from its date.
After the bank returns it unpaid, the lender has 30 days from receiving that information to send you a written demand notice.
You then have 15 days from receiving the notice to pay the cheque amount.
If you do not pay within those 15 days, the lender can file a criminal complaint in court within one month after that.
The 15-day window is the most important part. If you pay the cheque amount within it, there is no offence under Section 138.
What happens if a case is filed?
If the matter goes to court, the possible punishment under Section 138 is imprisonment of up to two years, a fine of up to twice the cheque amount, or both. Section 25 carries similar penalties for electronic payments. A court can also order you to pay interim compensation to the lender while the case is running.
That said, very few borrowers who engage early end up facing these outcomes. The offence is compoundable, which means it can be settled between you and the lender at any stage, and courts actively encourage settlement in cheque bounce cases.
What to do when you receive the notice
Do not ignore it. Note the date you received it and work out the 15-day deadline.
Check the details: the cheque or mandate number, the amount, the date of return, and the loan account it relates to.
Confirm the notice is genuine. Fake legal notices are common with loan apps, so verify the sender with the lender directly. Our guide to spotting fake legal notices from loan apps explains how.
If you can pay the bounced amount within 15 days, do so through the lender's official channel and keep the receipt.
If you cannot pay in full, contact the lender in writing before the deadline. Explain your situation and propose a payment plan or settlement.
If you believe the amount is wrong or the debt is not legally owed, get advice from a qualified advocate and send a written reply.
Why the notice amount is often smaller than your total loan
A Section 138 notice is limited to the amount of the cheque that bounced. Your remaining loan balance is a separate civil matter. Many borrowers mix the two up. Paying the bounced cheque amount within 15 days protects you from the criminal case, while the rest of the loan can be restructured or settled through negotiation.
Can you settle the loan instead?
Yes. Lenders often prefer a settlement to a long court case. If your total debt has become unmanageable, a structured settlement can close both the bounced amount and the remaining dues. Read how one-time settlement for a personal loan works, or see how our payday loan settlement service in India approaches lenders on your behalf.
If your EMI failed through auto-debit rather than a cheque, our guide on loan app auto-debit and eNACH bounces covers the charges and next steps.
Key takeaways
A Section 138 or Section 25 notice gives you 15 days to pay the bounced amount.
Paying within that window means no offence is made out.
Even after a case is filed, it can be settled with the lender.
The notice covers only the bounced amount, not your full loan.
This article is general information and not legal or financial advice. For your specific case, consult a qualified advocate.
More guides on this topic: Legal Notice From a Bank or NBFC for Personal Loan Default: What It Means and How to Reply · Legal Notice from a Loan App: Real vs Fake, Your Rights and What to Do Next · Arbitration Notice for a Loan App or Personal Loan: What It Means and What to Do
About Payday Rescue: Payday Rescue Pvt. Ltd. is a Bengaluru-based debt advisory and negotiation service that has helped 2K+ borrowers across India deal with payday, loan app, personal loan and credit card debt. We are not a lender, NBFC or law firm. Office: 1198, Basement Floor, 3rd Main, 8th Cross Rd, BDA Layout, Chandra Layout, Bengaluru 560026.
Talk to us: call or WhatsApp +91 98865 50910, email support@paydayrescue.in (Mon–Sat, 9am–9pm). About us · Contact · Free consultation
Last updated: October 2026.
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