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CMA Foundation · Fundamentals of Business Laws and Business Communication · Negotiable Instruments Act, 1881

Ramesh draws a cheque for Rs. 50,000 on his bank. The payee delays presenting it for an unreasonable time. During this period the bank fails, and Ramesh, who had sufficient funds at the time presentment was due, suffers actual loss because of the delay. Under Section 84, what is the position of Ramesh?

Ramesh is discharged to the extent of the actual damage he suffered through the delay. Section 84 gives this relief where a cheque is not presented within a reasonable time and the drawer had funds and suffers loss. The holder then claims from the failed bank.

  1. AHe is discharged to the extent of the actual damage suffered through the delayCorrect
  2. BHe remains fully liable because delay never affects a drawer
  3. CHe is discharged only if the payee agrees in writing
  4. DHe is discharged fully even if he suffered no damage

Explanation

Section 84(1) says that where a cheque is not presented within a reasonable time and the drawer had funds and suffers actual damage through the delay, he is discharged to the extent of that damage. Discharge is limited to actual damage, so full liability or discharge without damage is wrong. The holder then becomes a creditor of the bank to that extent.

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