Negotiable Instruments Act, 1881

Group U2: Jem Joseph Elias || Sudeep Sinha || Tushar Sharma || Vinni Chowdhary

Current Issue
Currently 40 lacs pending cheque bouncing cases in which
amount involved exceeds Rs.1200 crore.

A Public Interest Litigation was filed by Indian Banks

Association asking for speedy adjudication of cheque
dishonour cases under Section 138 of the Negotiable
Instruments Act.

Negotiable Instruments Act, 1881

The law of commercial world which was enacted to facilitate
the activities in trade and commerce making provision of
giving sanctity to the instruments which could be deemed to be
convertible to money and easily passable from one person to
another.
Main objective of the Act - To legalize the system by which the
instruments contemplated by it could pass from hand to hand
by negotiation like any other goods.

Negotiable Instruments
A written and a signed document entitling a person to a
sum of money specified in it and which is transferable from
one person to another either by delivery or by an
endorsement and delivery
3 most commonly used instruments
Promissory Notes, Bill of Exchange, Cheque
Cheque: A BOE(Bill of Exchange) drawn on a specified
banker and not expressed to be payable otherwise than on
demand

Dishonored Cheque
Covered under the section 138
Considered an offense if a cheque is dishonored due to
insufficiency of funds
Imprisonment for a term of up to two years or with a fine twice
as much as the amount of cheque or both
Cheque should be issued in discharge of a liability and hence
a gift cheque is not counted under this category
Cheque to be presented within three months

Cases
1. In order to attract the provisions of Sec138 of Negotiable
instruments Act, it is necessary that cheques are issued in
discharge of a debt or liability. Unless cheques are so issued,
drawer will not be guilty of offense under Sec 138 even if other
conditions are fulfilled
Inmark Finance & Invt.co.Pvt.Ltd and another vs Metropolitan
Magistrate, Bombay & Others

Cases
2.Post dated cheques if it is presented within 6 months from the
date it bears, the presentation shall be deemed to be in order
and hence cause of action shall lie u/s138
Anil Kumar Sawhney vs Gulshan Rai

Cases
3.Notice shall be served by ordinary post or even telegram.
But the onus of proof of service of notice shall lie on the
petitioner. If notice is served within the said 30 days no
fresh cause of action can be created by presenting the
cheque again
.Sadanandan Bhadran vs Madhavan Sunilkumar

Cases
4. The essential ingredient to take cognizance of the offense
u/s 138 is that there should be a complain in writing by the
payee and the said compliant should disclose an offense
u/s138
Venkita Sivaram Prasad vs Rajeswari Constructions

Cases
5.When a person has drawn a cheque for the discharge of
liability of another person without creating any document it
will not and would not come u/s138
Hitan Sagar vs IMC Ltd

Questions..