Quiz 1: Mid-Course — Negotiable Instruments Act & Section 138

Question 1 of 5

A cheque is presented to the bank 4 months after the date on the cheque. The bank returns it as 'stale'. Does this attract Section 138 liability?

AYes — dishonour for any reason attracts Section 138 BNo — the cheque was not presented within the 3-month validity period; dishonour of a stale cheque does not attract Section 138 CYes — but only for the amount minus the bank charges DNo — stale cheque dishonour is a civil matter only

Question 2 of 5

Under Section 139 of the NI Act, the statutory presumption is that:

AThe drawer is presumed guilty once a cheque bounces BThe cheque was issued in discharge of a legally enforceable debt; this presumption can be rebutted by the drawer on a balance of probabilities CThe payee forged the cheque DThe bank is liable for the dishonour

Question 3 of 5

A drawer gave a blank signed cheque to a payee as security against a loan. The payee filled in Rs. 5 lakh (the loan amount) and the cheque bounced. The drawer claims the cheque was given as security only, not in discharge of a debt. What is the drawer's legal position?

AThe drawer is absolutely immune because the cheque was given as security BThe drawer must rebut the Section 139 presumption that the cheque was issued in discharge of a debt; merely claiming it was security is not enough — the drawer must prove this assertion CThe payee cannot file a Section 138 complaint because the cheque was given as security DThe Section 138 complaint is automatically quashed if the drawer files an FIR for cheque fraud

Question 4 of 5

A cheque is dishonoured because the drawer issued a stop payment instruction to the bank. Does this attract Section 138 liability?

ANo — stop payment instructions are a legitimate banking right BYes — the Supreme Court has held that stop payment is equivalent to having insufficient funds for purposes of Section 138 CNo — stop payment dishonour is a different category not covered by Section 138 DYes — but only if the stop payment instruction was given fraudulently

Question 5 of 5

The Section 138 offence requires that the cheque was issued 'in discharge of a legally enforceable debt or liability.' A cheque given as a gift does not attract Section 138 because:

AGifts are exempt from criminal law generally BThere is no legally enforceable debt underlying a gift; the cheque was not issued in discharge of any obligation CThe gift was not accepted by the payee DGifts must be given by demand draft, not by cheque

Quiz 1 — Mid-Course