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

Imran's cheque for Rs 1,50,000 in favour of Joseph was dishonoured for insufficient funds. Joseph sent a valid notice, and Imran did not pay within 15 days. Under Section 138, what is the maximum punishment on conviction?

Imran can be punished with imprisonment up to two years, or a fine up to twice the cheque amount, or both. For a Rs 1,50,000 cheque, the maximum fine is Rs 3,00,000. The other options misstate the term or the fine.

  1. AImprisonment up to 2 years, or a fine up to twice the cheque amount, or bothCorrect
  2. BImprisonment up to 6 months, or a fine up to the cheque amount, or both
  3. CImprisonment up to 5 years only, with no fine
  4. DOnly a fine of Rs 1,000

Explanation

On conviction under Section 138, the drawer may be punished with imprisonment up to two years, or with a fine up to twice the cheque amount, or with both. Here twice the cheque amount would be Rs 3,00,000. The other options understate or overstate the penalty.

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