CMA Intermediate · Business Laws and Ethics · Negotiable Instruments Act, 1881
Under Section 138 of the Negotiable Instruments Act, 1881, what is the maximum term of imprisonment that may be imposed on a drawer whose cheque is returned unpaid for insufficiency of funds?
The maximum imprisonment is two years. Section 138 allows imprisonment up to two years, or a fine extending to twice the cheque amount, or both. The six-month figure relates only to the time within which the cheque must be presented to the bank.
- ASix months
- BOne year
- CTwo yearsCorrect
- DThree years
Explanation
Section 138 provides punishment with imprisonment for a term which may extend to two years, or with fine up to twice the cheque amount, or with both. Six months is the presentment period, not the punishment, and one year or three years do not appear in the section.
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