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CMA Intermediate · Business Laws and Ethics · Negotiable Instruments Act, 1881

Anil issued a cheque to Bharat in discharge of a debt. In a prosecution under Section 138 after dishonour for insufficient funds, Anil argues that he honestly had no reason to believe, when issuing it, that the cheque would be dishonoured. What is the legal position under Section 140?

The defence is not permitted. Section 140 says it is no defence in a Section 138 prosecution that the drawer had no reason to believe, when issuing the cheque, that it might be dishonoured for the reasons stated in that section.

  1. AThe defence succeeds if Anil proves his honest belief
  2. BThe defence succeeds only if the amount was less than Rs 1 lakh
  3. CThe defence is not allowed in a Section 138 prosecutionCorrect
  4. DThe defence succeeds if Bharat presented the cheque after three months

Explanation

Section 140 states that it is not a defence that the drawer had no reason to believe the cheque might be dishonoured on presentment for the reasons in Section 138. The honest belief of the drawer is therefore irrelevant. Presentment after three months is within the six-month period and does not help him.

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