NACH / ECS Mandate Dishonour (Section 25 PSS Act) vs Section 138 NI Act: Differences

NACH / ECS Mandate Dishonour (Section 25 PSS Act) vs Section 138 NI Act: Differences

A bounced auto-debit is not the same as a bounced cheque. Banks and NBFCs in Hyderabad routinely present NACH or ECS mandates for EMIs. When that debit fails for want of funds, the criminal path is Section 25 of the Payment and Settlement Systems Act, 2007 — not a standalone Section 138 NI Act complaint. This guide explains the difference, the NACH mandate dishonour notice timeline, where to file auto-debit bounce legal action in Hyderabad, and the mistakes that get complaints dismissed.

What is a NACH or ECS mandate bounce?

NACH (National Automated Clearing House) and the older ECS system are electronic debit instructions. The borrower signs a mandate. The lender presents it through NPCI. The bank tries to pull the EMI from the mapped account.

If the pull fails because the account does not have enough money, or because the debit exceeds the arrangement with the bank, the law treats that failure as dishonour of an electronic funds transfer. That is the trigger for Section 25 Payment and Settlement Systems Act Hyderabad complaints.

A cheque is a negotiable instrument. A NACH mandate is not. That single distinction decides which statute applies.

Does Section 138 apply to NACH, ECS or UPI auto-debit?

No — not by itself. Section 138 of the Negotiable Instruments Act, 1881 applies to a cheque drawn on an account. Courts do not treat a NACH or ECS mandate as a cheque.

That does not mean there is no criminal case. Section 25 of the Payment and Settlement Systems Act, 2007 creates a separate deemed offence for dishonour of an electronic funds transfer. Section 25(5) then says that Chapter XVII of the NI Act (Sections 138 to 147) applies to that dishonour “to the extent the circumstances admit”.

In practice, complaints are often titled “Section 25 PSS Act read with Section 138 NI Act”. That is a drafting device, not proof that a NACH bounce can be converted into a pure cheque-bounce case. If there is no cheque, there is no independent Section 138 prosecution.

The Delhi High Court in Ritu Jain v. State (Crl. M.C. 555/2016, decided 12 March 2019) recognised that Chapter XVII travels into a Section 25 case only so far as the facts allow. Trial courts across the country, including recent 2025–2026 judgments, have followed that approach.

Section 25 PSS Act vs Section 138 NI Act — side-by-side

Point	Section 25 PSS Act, 2007	Section 138 NI Act, 1881
Instrument	Electronic funds transfer — NACH, ECS, and other EFTs initiated from an account	Cheque (including post-dated cheque)
Trigger	EFT cannot be executed for insufficient funds or exceeding the bank arrangement	Cheque returned unpaid for insufficient funds, exceeds arrangement, or other statutory return reasons used in 138 practice
Debt condition	EFT must be for a legally enforceable debt or other liability	Cheque must be for a legally enforceable debt or other liability
Guidelines	Transfer must follow the system provider’s procedural guidelines	No equivalent “system provider guidelines” condition
Demand notice	Written demand within 30 days of receiving bank information of dishonour	Written demand within 30 days of receiving bank information of dishonour
Grace to pay	15 days from receipt of the notice	15 days from receipt of the notice
Punishment	Up to 2 years, or fine up to twice the transfer amount, or both	Up to 2 years, or fine up to twice the cheque amount, or both
Presumption	Section 25(2) and 25(4) — debt purpose and bank memo of dishonour	Sections 118 and 139 NI Act
Who can complain	Person aggrieved by the dishonour (proviso to Section 28 PSS Act)	Payee or holder in due course (Section 142 NI Act)
Company officers	Section 27 PSS Act; Chapter XVII may also apply to the extent admitted	Section 141 NI Act — specific “in-charge” averments required
Forum	Metropolitan Magistrate or Judicial Magistrate First Class	Same class of Magistrate; Hyderabad NI Act courts in practice

The notice structure looks similar. The instrument is not. That is why a lender cannot simply paste a Section 138 template onto a NACH return memo and expect the complaint to survive.

When does Section 25 actually apply?

A missed EMI is not automatically a crime. All of the following must line up:

1. An electronic funds transfer is initiated from an account maintained by the person.
2. It cannot be executed because of insufficient credit in that account, or because it exceeds the amount arranged with the bank.
3. The transfer was meant to pay another person towards a legally enforceable debt or other liability.
4. The transfer followed the system provider’s procedural guidelines.
5. The beneficiary sends a written demand notice within 30 days of receiving the bank’s information that the transfer failed.
6. The initiator does not pay within 15 days of receiving that notice.

If even one of those conditions fails, the offence is not made out. A technical reject, a cancelled mandate, a wrong Unique Mandate Number, or a return reason that is not insufficiency or excess-of-arrangement, needs a fact-specific look. Do not assume every “auto-debit bounce” is Section 25.

Section 25(3) also shuts one common excuse: it is not a defence that the person who gave the mandate did not believe the account would be short on the debit date.

NACH mandate dishonour notice — timeline that courts actually enforce

Day 0 — bank information of dishonour

The 30-day clock for the demand notice starts when the beneficiary receives information from the concerned bank that the electronic transfer failed. Keep the NACH / ECS return memo, NPCI reference, Unique Mandate Number, and the date the lender’s system recorded the return.

Within 30 days — written demand

The notice must demand payment of the failed transfer amount. Serve it in a manner you can prove — typically RPAD plus email if the contract allows. A vague “please regularise your loan” letter is not a statutory demand.

Calcutta High Court in N.P. Mathi Lingan v. State of West Bengal (3 September 2025) quashed a Section 25 case where the mandatory 30-day notice window from knowledge of dishonour was not met. Late notice is not a curable formality.

15 days after receipt — pay or the offence completes

The person who initiated the transfer has 15 days from receipt of the notice to pay. The cause of action for the complaint arises only after those 15 days expire. Filing earlier is premature.

Allahabad High Court in Thakur Sagar v. State of U.P. (25 September 2024) treated a complaint filed before expiry of the 15-day period as not maintainable. Hyderabad Magistrates apply the same arithmetic.

Filing the complaint

The PSS Act itself does not write a separate limitation for presenting the complaint. Because Section 25(5) imports Chapter XVII “to the extent the circumstances admit”, many trial courts apply the one-month window in Section 142 of the NI Act — counted from the day after the 15-day payment period ends. That application should be verified on the facts of the case and the latest High Court view before filing or defending.

Where to file auto-debit bounce legal action in Hyderabad

Section 28 of the PSS Act says no court lower than a Metropolitan Magistrate or a Judicial Magistrate of the First Class shall try the offence. For Section 25, the court may take cognizance on a written complaint by the person aggrieved by the dishonour. It is a private complaint, not a police FIR.

In Hyderabad and the surrounding commissionerate areas, these complaints are ordinarily presented before the same Magistrate courts that hear Section 138 matters:

• Metropolitan Magistrate courts at Nampally / Hyderabad MSJ complex, for Hyderabad district facts;
• Cyberabad Magistrate courts, where the relevant account, office or accused’s residence maps to that commissionerate;
• Rachakonda Magistrate courts, on the same territorial logic.

Section 142(2) NI Act jurisdiction is written around cheques and the payee’s home-branch. A NACH debit does not fit that language perfectly. Courts have accepted complaints where the beneficiary carries on business, where the accused resides, or where the collecting bank recorded the return. Territorial jurisdiction is therefore a live defence. Verify the current eCourts / MSJ chart and the branch-to-court mapping before filing.

Appeal from conviction ordinarily lies to the Sessions Court. Quashing or revision after the Bharatiya Nagarik Suraksha Sanhita, 2023 is under Section 528 BNSS before the Telangana High Court — reserved for clear statutory defects, not for a full trial on disputed facts.

Documents that matter

For the complainant (bank, NBFC, landlord, vendor):

• Loan / facility / invoice documents proving a legally enforceable debt on the debit date.
• Signed NACH / ECS mandate, UMRN, and NPCI registration proof.
• Presentation record and bank / NPCI return memo showing the reason of return.
• Proof of the date on which the beneficiary received information of dishonour.
• Statutory demand notice, postal receipt, tracking, and acknowledgment or deemed service material.
• Calculation of the failed transfer amount — not an inflated “entire outstanding” figure unless that exact amount was the EFT.
• Authorisation to file, board resolution or power of attorney, and GST / entity documents if the complainant is a company.

For the accused (borrower, director, guarantor who signed the mandate):

• Account statements for the presentation window.
• Mandate cancellation or stop-debit request and bank confirmation, if any.
• Proof that the underlying liability was disputed, time-barred, already paid, or not legally enforceable.
• Proof of payment after notice, or of settlement.
• If a director or partner is arrayed — material showing you were not in charge of day-to-day business (Section 27 PSS Act).

How a Section 25 complaint proceeds

1. Collect the return memo and compute the 30-day notice clock from the date of bank information.
2. Issue a written NACH mandate dishonour notice demanding the failed amount. Wait for proof of service.
3. Wait the full 15 days after receipt. Do not file on day 10.
4. File a written complaint before the competent MM / JMFC with the documents listed above. Proceedings after 1 July 2024 follow the BNSS complaint procedure (old Section 200 CrPC is now Section 223 BNSS).
5. Magistrate examines the complainant, may call for an inquiry if the accused lives outside the court’s local limits, and then issues summons if there is sufficient ground.
6. Accused appears and seeks bail. The offence is tried as a complaint case. In practice it is treated like a Section 138 prosecution — bailable, and not an FIR offence.
7. Trial turns on the statutory presumptions in Section 25(2) and 25(4), and, to the extent admitted, the presumptions in Sections 118 and 139 NI Act as explained in Rangappa v. Sri Mohan (2010) 11 SCC 441.
8. Compounding is often explored. Section 147 NI Act may apply through Section 25(5). Cost guidelines in Sanjabij Tari v. Kishore S. Borcar, 2025 INSC 1158, were written for cheque cases — whether a Magistrate applies the same slab in a pure Section 25 matter should be verified case by case.

Defences that actually work

• Notice sent after 30 days from bank information of dishonour.
• Complaint filed before the 15-day payment period ended.
• Return reason is not insufficient funds or exceeding arrangement.
• No legally enforceable debt on the date of the electronic transfer — security-only mandate with no crystallized liability, time-barred claim, or amount already paid.
• Mandate never validly registered, or presentation violated NPCI / bank guidelines.
• Service of notice not proved.
• Wrong person arrayed — especially a company secretary, independent director or employee with no Section 27 “in-charge” pleading.
• Territorial jurisdiction does not lie in the chosen Hyderabad court.

A “I did not know the EMI would bounce” defence is weak because of Section 25(3). A “this is only civil” defence is also weak once the statutory conditions are pleaded. The better attack is on ingredients, notice mathematics, and identity of the accused.

Company directors and personal liability

If the mandate is in a company’s name, the company can be prosecuted. Section 27 PSS Act also pulls in every person who was in charge of, and responsible to, the company for the conduct of its business at the time of the contravention. A director, manager or secretary can be added if the contravention happened with that person’s consent, connivance or neglect.

Vicarious liability is not automatic. The complaint must plead the role. Mere designation on the letterhead is not enough — a point Calcutta High Court reiterated in the 2025 Mathi Lingan matter while examining a company secretary. The same discipline that courts apply to Section 141 NI Act complaints is the safe drafting standard.

What if there is both a NACH mandate and a security cheque?

Then the two instruments can generate two different prosecutions. The NACH return travels under Section 25. The cheque, if separately presented and dishonoured, travels under Section 138. One does not swallow the other. Settlement talks should cover both instruments, or the unused cheque remains a live risk.

Civil recovery is not barred. A bank may still issue a Section 13(2) SARFAESI notice, file an original application before DRT Hyderabad-1 or Hyderabad-2, or sue on the loan. Section 25 is an additional criminal pressure point, not a substitute for a money decree.

Common mistakes to avoid

• Treating every auto-debit failure as a cheque bounce and filing a pure Section 138 complaint with no cheque on record.
• Demanding the entire loan outstanding in the statutory notice when only one EMI transfer failed.
• Counting 30 days from the EMI due date instead of from bank information of dishonour.
• Filing the complaint during the 15-day grace.
• Not annexing the bank communication that Section 25(4) needs for the presumption of dishonour.
• Arraying every director without “in-charge” facts.
• Ignoring a parallel security cheque, or conversely assuming the cheque “converts” the NACH bounce.
• Going to the police station for an FIR. Section 25 is a Magistrate complaint under the Section 28 proviso.

When to consult an advocate

• You have received a NACH mandate dishonour notice and the 15-day clock is running.
• A summons has come from a Hyderabad, Cyberabad or Rachakonda Magistrate in a Section 25 case.
• You are a lender and need to decide whether the return reason supports Section 25, Section 138, both, or only a civil recovery.
• A director or partner has been named and the complaint is thin on role.
• You want to compound, or you want to test quashing because notice or limitation is defective.

Checklist

• Identify the instrument: NACH / ECS / other EFT, or a cheque, or both.
• Read the exact return reason on the bank / NPCI memo.
• Diary the date of bank information of dishonour.
• Issue or examine the written demand within 30 days.
• Do not file, and do not assume the offence is complete, before 15 days from receipt of notice.
• Match the demanded amount to the failed transfer.
• Collect mandate + UMRN + return memo + service proof.
• Pick the correct Magistrate court; do not copy a Section 142(2) home-branch assumption blindly.
• If a company is involved, plead or attack Section 27 role-specific facts.
• Keep civil recovery and SARFAESI / DRT strategy on a separate track.
• Verify before filing whether the forum will apply Section 142 limitation and Section 143A interim compensation through Section 25(5).

Conclusion

Auto-debit bounce legal action in Hyderabad sits on Section 25 of the Payment and Settlement Systems Act, 2007. Section 138 remains the cheque statute. The two provisions share a 30-day notice and a 15-day payment window, and Section 25(5) borrows Chapter XVII of the NI Act only so far as the facts allow. They are not interchangeable.

If you are the beneficiary, treat the return memo, the notice clock and the 15-day wait as jurisdictional facts. If you have received a NACH mandate dishonour notice, do not ignore the 15-day window, and do not assume the case is “only civil”. Get the instrument, the return reason and the service proof checked before you reply or appear.

Disclaimer

This article is for general information for readers in India, including borrowers, business owners and litigants in Hyderabad and Telangana. It is not legal advice and does not create an advocate-client relationship. Statutory application, territorial jurisdiction, limitation through Section 25(5), interim compensation and compounding practice can turn on facts and on the latest court view. Have the live papers reviewed by an advocate before you issue a notice, file a complaint, or enter appearance.

Related reading

• Is Cheque Bounce a Criminal Offence? Intent, Defences and Practical Advice
• Section 138 Demand Notice — Draft, Service Proofs and Deadlines
• Filing a Security Cheque Bounce Case (Landlord and Business)
• Stop Payment vs Cheque Bounce — Legal Consequences
• Where to File a Section 138 Complaint in Hyderabad
• NBW and Recall in Section 138 Matters (Telangana)
• Interim Compensation in Cheque Bounce Cases (Section 143A)

Received a NACH or ECS dishonour notice, or need to file auto-debit bounce legal action in Hyderabad? Share the return memo, the mandate and the notice. We will map the 30-day and 15-day clocks, the correct Magistrate court, and whether Section 25, Section 138, or only a civil recovery is the honest path.