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

Ravi Kulkarni of Pune gave a cheque of Rs 60,000 to Anita Sharma to repay a loan she had lent him earlier. The bank returned the cheque unpaid because the funds in Ravi's account were insufficient. Which of the following is the essential condition for Ravi to be liable under Section 138?

Ravi is liable under Section 138 only if the cheque was issued to discharge, wholly or partly, a legally enforceable debt or other liability. Crossing, third-party endorsement or presentation relative to the loan date are not requirements for the offence.

  1. AThe cheque must have been issued for discharge, wholly or partly, of a legally enforceable debt or other liabilityCorrect
  2. BThe cheque must have been crossed generally before being delivered to Anita
  3. CThe cheque must have been presented to the bank within one month of the date of the loan
  4. DThe cheque must have been endorsed by a third person before presentation

Explanation

Section 138 applies only when the cheque is drawn for discharge, wholly or partly, of a legally enforceable debt or other liability. A repaid loan is such a debt. Crossing, endorsement by a third person, or a link to the loan date are not conditions for the offence.

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