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CA Foundation · Business Laws · The Negotiable Instruments Act, 1881

Harsh gets a cheque for Rs 60,000 drawn by Imran in his favour. Imran stops payment by instructing the bank before the cheque reaches the bank, and the cheque is dishonoured. The only stated ground is 'payment stopped by drawer'. Which statement best reflects the Act's approach to a complaint under the cheque dishonour provisions?

The court presumes the cheque was given for a legal debt or liability, so Imran must rebut that presumption. A stop-payment instruction is not an automatic defence, but the offence still requires the statutory conditions, such as timely presentment, a demand notice, and non-payment after it.

  1. ANo offence arises because the bank, not the drawer, dishonoured it
  2. BOffence arises only where the account has insufficient funds, and never when payment is stopped
  3. CThe provision is attracted only if the cheque was crossed
  4. DThe court presumes the cheque was issued for a legal debt or liability, and Imran must rebut this, though the cheque dishonour offence is not automatically made out without the statutory conditionsCorrect

Explanation

The presumption of consideration and of holding for a debt applies to cheques, so Imran must rebut it. The offence depends on the statutory conditions such as presentation within validity, a notice demand, and failure to pay within the period. Crossing is irrelevant, and stopping payment does not by itself defeat the rule.

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