Perhaps the trickiest moment in a cheque bounce settlement can come after both parties have finally agreed on a figure. The complainant wants assurance that the money will definitely be paid. The drawer wants evidence that payment has been made, and that the pending Section 138 case will be allowed to die despite the settlement. That’s where the mode of payment becomes critical. Imagine a businessman agrees to pay ?8 lakh in settlement of a dishonoured cheque claim. One party demands a demand draft. The other insists on RTGS, because the funds go directly to the bank account. Both modes of payment may work. But each creates a different set of documentary evidence, with its own practical dangers. RTGS or demand draft can usually be used to settle a cheque bounce, provided the terms on which settlement is agreed permit that mode of payment. The Negotiable Instruments Act, 1881 does not specify RTGS or demand draft as the mandatory method by which a settlement must be effected. The important thing is that the payment made is sufficient to discharge the agreed liability. And that the settlement is documented in legally appropriate terms, and (where proceedings have been initiated) correctly placed before the court. Section 147 NI Act allows compounding of offences under the Act. In reality, which option is safest will depend on the amount involved, the wording of the settlement, the stage of the proceedings and the expectations of the complainant. Where the parties have agreed to settle, but have concerns about the documentary proof of payment, or acknowledgment, compounding or closure of the pending case, they may consult BK Singh Advocate. The simple point to remember is this: payment of the money and legal closure of the dispute are two things that should happen together. They are not necessarily the same thing. Cheque bounce cases almost always relate to money that has already been left unpaid for months. At the point settlement negotiations commence, mutual faith can be in short supply. The complainant may fear that another cheque may bounce. The accused may want to avoid making a hefty payment and not receive any written acknowledgment of payment or without the terms of settlement being documented by the court. Such concerns underscore the importance of traceability and documentary evidence. The Apex Court has given recognition to settlement and compounding as inherent aspects of proceedings under Section 138. In September 2025, the Court went a step further by issuing directives for online-payment facilities for Section 138 cases and even mused on compounding/satisfaction of the petition upon receiving evidence of payment. This has cemented traceable payment records as factually significant in contemporary cheque-bounce jurisprudence. While factual matrix and the court record in individual cases may vary, the basic procedure under the NI Act for litigants based out of Delhi NCR, Mumbai, Bengaluru, Hyderabad, Chennai, Kolkata, Jaipur or elsewhere in India remains similar. BK Singh Advocate can help you determine if a particular mode of payment satisfies the real terms of your settlement instead of presuming RTGS/ Demand Draft or else mode of payment to be conclusive. Yes. A settlement under section 138 can mandate payment by RTGS/demand draft/other mode of banking/payment acceptable to both parties, as per the terms of the settlement agreed upon between the parties. Section 147 does not concern itself with forcing one particular banking instrument. Supreme Court has entertained cheque-bounce settlements where payment was made by issuing a demand draft. See https: //indiankanoon.org/doc/1872108/ - wherein a bona fide settlement agreement was treated as capable of constituting compounding under section 147. Digital mode of payment is equally competent. In fact, the Supreme Court's directions in 2025 specifically envisaged an online mode whereby the accused can make payment of the cheque amount. This is to be followed by confirmation to the complainant and then suitable orders with respect to compounding / closure. This however does not mean that any unilateral transfer of funds will lead to a compounding/order of closure. Compounding under section 147 is normally predicated on consent of the complainant. See Supreme Court's clarification in 20 24 that a section 138 offence cannot normally be compounded under section 147 if the complainant is opposed to it merely because money has been deposited/ compensation offered. Therefore, BK Singh Advocate may want to review the written settlement before making such payment so as to avoid the amount/payment mode/intended legal consequence from being open to ambiguity. Records regarding settlement should be able to answer 3 simple questions. What was agreed? What was paid? What was to happen once paid? Ideally a good file will include:- Where payment is received by instalments, it is important that all instalments can be clearly tracked to the settlement schedule. "I have received the amount" message on WhatsApp is open to too many interpretations if it does not specify whether the payment was in full and final settlement or part payment or something else. It could lead to unnecessary disputes. BK Singh Advocate may help you review these. Especially useful where large amounts or Section 138 proceedings are pending. Legal review is advised where the amount is large; matter is already placed before the Magistrate; Conviction has been awarded; appeal is pending; instalments are being asked or Complainant and Accused differ on timing of withdrawal/compound.. Next red flag: vague settlement clause. "I'll withdraw the matter after payment" leaves open issues like when payment is due; which mode at bank is okay; whether acknowledgement required; interest; litigation costs; or if part amount is paid into the account. Legal stage also important. SC recognises that compounding after conviction may entail procedure with reference to appellate court. BK Singh Advocate can be engaged before making hefty RTGS transfer or handing over demand draft if legal consequence of said payment not clearly recorded. Legal help with Section 138 Notice, Cheque filing, defense and settlement matters are offered by Cheque Bounce Lawyer. Service pages we have published also address negotiations and work done in court when it comes to cheque bounce cases and settlements. Reviewing the cheque and liability documentation, determining where in the process you are, reviewing proposed settlement language, gathering evidence of payment and getting the matter in the position to be lawfully compounded or closed may all be part of the assistance provided, depending on where in the process you are. Cheques drawers, companies, complainants and individuals who desire for the language in the settlement document to accurately reflect the terms of their payment arrangement will be helped by BK Singh Advocate. BK Singh Advocate can also examine the language of the settlement, bank statements, and any court orders that have been issued and guide you on your legal options if money has been paid but the other party is disputing that it counts. While no attorney can promise you that your settlement will be accepted on your desired terms. Issues involving Consent, Documentation, payment and where you are in the process will always be fact specific. Ans. Yes. RTGS can be specified as a payment mode on the basis of parties agreement. RBI considers a completed RTGS settlement as final & irrevocable and issues a UTR based transaction statement. When already pending, link payment to the settlement and Court process appropriately. Ans. Yes. Demand drafts are one method of making a settlement. The Hon’ble Supreme Court has actually settled a Section 138 by receiving an agreed amount through demand draft. Ensure the surrounding settlement terms and Court closure are also handled appropriately. BK Singh Advocate will review agreements where a DD is being given. Ans. RTGS will allow for better immediate electronic traceability of funds if ?2 lakh or more is involved in a settlement. Demand drafts may be preferred if there is a need for a physical bank instrument for settlement purposes. Avoid choosing either without ensuring the terms are documented. Ans. Retain bank statement showing the debit, transaction confirmation, beneficiary information and allotted UTR number. According to RBI each RTGS transaction is allotted a UTR which is a unique 22 digit number that identifies a transaction. BK Singh Advocate can also recommend tying those records to a settlement deed and receipt. Ans. Only the facts would determine the answer to this. Including what was agreed and whether the money was received as full and final settlement would impact whether the receipt of funds can be ignored before court. Compound is a legal status and receiving money should not automatically be equated to it. Documentation is key. Ans. Section 147 says compounding requires consent of the complainant. Notably, the Supreme Court has gone on to hold that offence under Section 138 cannot be compounded without complainant’s consent under Section 147 in usual cases. Transfer of money does not automatically mean accused can dictate terms. BK Singh Advocate can assess disputes where money was transferred but accused is denying settlement was agreed. Ans. According to the RBI’s Handbook of RTGS the minimum amount is ?2 lakh, and there is no upper limit on the amount that can be transferred through RTGS. RTGS can be done 24 x 7. Ans. RBI directions say cheques, drafts, pay orders or banker’s cheques should not be honoured by banks if presented after three months from the date of the instrument. Hence, BK Singh Advocate should review cases to ensure deadlines are considered where a DD is to be issued for settlement. Ans. Settlement can be attempted post summons. The appropriate application should be filed accounting for both the pending complaint and prior Court record. Even the Supreme Court's latest 2025 directions encourage making payments and settling at the outset of Section 138 cases. Ans. Payable bank information helps with proving a transaction took place. At minimum the deed should identify amount, mode,payment timing and what should happen after payment is received. BK Singh Advocate reviews settlement deeds where clients want payment and legal closure to be synchronized. RTGS and demand draft are both acceptable means to effect settlement of a cheque bounce, the safer option depends less on the instrument itself. RTGS provides immediacy of electronic transfer, a UTR based record and no need to deal with a physical instrument. Demand draft is still a valid form of payment recognised as issued by the bank. Depending on the parties and the need to physically deliver an instrument, it may also be suitable for settlement. Highest risk for legal trap lies in poorly drafted settlement terms rather than the method of payment. If a complaint, summons, trial, conviction or appeal under Section 138 is already pending payment should be considered with the settlement terms and from what stage the court is willing to accept an order. Section 147 allows for compounding but consent and stage of proceedings are factors. BK Singh Advocate may provide legal review and documentation for settlement of a cheque bounce involving RTGS, demand draft, payment in instalments or pending prosecution.Why Does the Payment Method Matter in India in 2026?
Quick Facts
Can RTGS or Demand Draft Legally Be Used for Settlement?
What Documents Should Be Kept After Payment?
When Should You Consult a Cheque Bounce Lawyer?
How Can Cheque Bounce Lawyer Assist With Settlement?
Frequently Asked Questions
1. Can I do cheque bounce case settlement through RTGS?
2. Can I do Section 138 settlement by demand draft?
3. Demand draft or RTGS which is more safe?
4. What evidence to keep after RTGS payment is done?
5. Complainant received money, can he still go ahead with the case?
6. Can an accused compel settlement by transferring cheque amount?
7. What is the minimum limit for RTGS?
8. What is the validity of demand draft?
9. Is it possible to make payment after getting summons in cheque bounce case?
10. Settlement deed should mention RTGS UTR number or DD number?
Final Thoughts
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