The Real-Life Scenario
In the age of UPI and instant transfers, salary cheques are rare. But if your employer issues one and it bounces, it’s not just a payroll glitch, it can trigger criminal liability under Indian law.
1. Section 138 of the Negotiable Instruments Act, 1881 [NI Act]
This is the primary law governing cheque dishonour.
- Trigger: Cheque dishonoured due to “Insufficient Funds” or “Account Closed.”
- Consequences:
- Imprisonment up to 2 years for the signatory/directors.
- Fine up to twice the cheque amount.
- Why it matters: Salary is a legally enforceable debt. A bounced cheque is treated as a completed offense.
2. Dual Remedy Framework: NI Act vs Labour Code
| Law | What It Covers | Impact of Cheque Bounce |
| Negotiable Instruments Act, 1881 (Sec. 138) | Dishonour of cheque due to insufficient funds/account closed. | Criminal liability: imprisonment up to 2 years, fine up to twice cheque amount. |
| Code on Wages, 2019 (Sec. 17 & 54) | Timely payment of wages within 7 days of wage period. | Treats bounced cheque as non-payment → fines up to ₹50,000, repeat = imprisonment. |
Key Clarification: The Labour Code does not create a new “cheque bounce offense.” It penalizes employers for non-payment of wages on time. A bounced cheque = non-payment
3. Step-by-Step Recovery Plan
- Secure the Return Memo: Bank slip stating reason for dishonour.
- Send Legal Notice: Within 30 days, demand payment via registered post. Employer has 15 days to comply.
- File Complaint: If unpaid, file criminal complaint in Magistrate’s Court within 30 days of notice expiry.
Most employers settle after receiving a Section 138 notice, as directors’ liability can affect their business and travel.
4. Manager Excuses vs Legal Reality
| What Employers Say | What the Law Says |
| “It was a technical error.” | Dishonour = completed offense. “Error” is rarely a defense. |
| “We’re facing cash crunch.” | Financial hardship is not a valid excuse. |
| “Cheque was a security deposit.” | Salary is a legally enforceable debt; excuse fails. |
5. Can You File a Police Complaint?
- Primary remedy: Section 138 NI Act (criminal complaint in court).
- Additional remedy: If employer knowingly issued cheque from empty account to deceive, FIR under Section 420 IPC/BNS (Cheating) may be filed.
6. HR Compliance Checklist [FREE]
- Avoid issuing salary cheques unless funds are guaranteed.
- Ensure wages are paid within 7 days of month-end.
- Use electronic transfers (NEFT/UPI) to reduce dishonour risk.
- Maintain records to prove timely payment.
- Train payroll teams on NI Act liability.
- Never delay FnF settlement beyond 2 working days (as per Wage Code).
7. Employee FAQ: Quick Answers
Q1. Is a bounced salary cheque a crime?
Yes. It triggers criminal liability under Section 138 NI Act.
Q2. What is the penalty for employers?
Up to 2 years imprisonment and fines up to twice the cheque amount.
Q3. How long do I have to act?
30 days to send notice, then 30 days to file complaint if unpaid.
Q4. Can I still get my salary if cheque bounces?
Yes. Salary is a legally enforceable debt. You can recover through NI Act and Wage Code remedies.
Conclusion: Don’t Wait, Act Fast
A bounced salary cheque is not just a payroll error — it’s a criminal offense under Section 138 NI Act and a labour law violation under the Wage Code.
Employees must act within strict timelines (30-day notice + 30-day complaint window). Employers must ensure compliance to avoid fines, imprisonment, and reputational damage.
Disclaimer:
This article is for educational and informational purposes only and does not constitute legal advice. Cheque bounce cases are highly procedural; missing a single deadline can invalidate your claim. Always consult with a qualified advocate to draft legal notices and file court proceedings.