One Liner Case Study – 50 – Negotiable Instrument Act

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CASE STUDY 1 (MODEL CASE)

Facts:
Mr. Y issued a cheque of ₹10,000 to Mr. Z. The cheque was dishonoured due to insufficiency of funds and no overdraft facility.

(i) Is Mr. Y liable?

✅ Yes.
All ingredients of Section 138 are fulfilled.

Consequences:

  • Imprisonment up to 2 years, or

  • Fine up to twice the cheque amount, or

  • Both.

(ii) If cheque was issued as a donation?

❌ No liability under Section 138, because donation is not a legally enforceable debt or liability.

CASE STUDY 2

Facts:
Cheque issued for repayment of a friendly loan; dishonoured due to insufficient funds.

Answer:

(i) ✅ Section 138 attracted
(ii) ❌ If loan was gratuitous gift → No offence

CASE STUDY 3

Facts:
Cheque issued as advance payment for goods; goods not supplied; cheque dishonoured.

Answer:

(i) ❌ No offence — no existing debt
(ii) ✔️ If advance later adjusted towards liability → Section 138 applies

CASE STUDY 4

Facts:
Cheque issued for time-barred debt; dishonoured.

Answer:

(i) ✅ Section 138 applies
(ii) Because cheque amounts to promise under Section 25(3) Contract Act

CASE STUDY 5

Facts:
Cheque issued as security; liability arises later; cheque dishonoured.

Answer:

(i) ✅ Section 138 applies if liability existed on presentation
(ii) ❌ If liability never arose

CASE STUDY 6

Facts:
Cheque dishonoured with remark “Account Closed”.

Answer:

(i) ✅ Section 138 applies
(ii) Punishable same as insufficiency of funds

CASE STUDY 7

Facts:
Cheque dishonoured due to “Stop Payment” instructions.

Answer:

(i) ✅ Section 138 applies
(ii) Unless drawer proves absence of debt

CASE STUDY 8

Facts:
Cheque issued for illegal consideration (gambling debt).

Answer:

(i) ❌ No offence
(ii) Debt not legally enforceable

CASE STUDY 9

Facts:
Cheque dishonoured due to mismatch of signature.

Answer:

(i) ❌ Section 138 not attracted
(ii) No valid execution of cheque

CASE STUDY 10

Facts:
Cheque dishonoured due to “Refer to Drawer”.

Answer:

(i) ✅ Section 138 presumed
(ii) Bank return memo sufficient

CASE STUDY 11

Facts:
Cheque issued by minor; dishonoured.

Answer:

(i) ❌ No offence
(ii) Minor incapable of contracting

CASE STUDY 12

Facts:
Cheque issued from joint account; signed by one holder.

Answer:

(i) ✅ Signatory liable
(ii) Non-signing holder not liable

CASE STUDY 13

Facts:
Cheque issued by company; dishonoured.

Answer:

(i) ✅ Company + persons in charge liable
(ii) Section 141 applies

CASE STUDY 14

Facts:
Cheque issued by director without role in company affairs.

Answer:

(i) ❌ Not liable
(ii) No vicarious liability without specific averments

CASE STUDY 15

Facts:
Cheque dishonoured; notice sent after 30 days.

Answer:

(i) ❌ Complaint not maintainable
(ii) Mandatory time limit violated

CASE STUDY 16

Facts:
Cheque dishonoured; notice refused by drawer.

Answer:

(i) ✅ Deemed service
(ii) Section 138 applies

CASE STUDY 17

Facts:
Cheque dishonoured; notice sent by email only.

Answer:

(i) ⚠️ Valid if receipt proved
(ii) RPAD preferred

CASE STUDY 18

Facts:
Complaint filed before expiry of 15 days from notice.

Answer:

(i) ❌ Premature complaint
(ii) Not maintainable

CASE STUDY 19

Facts:
Cheque presented multiple times; dishonoured.

Answer:

(i) ✅ Notice after last dishonour valid
(ii) MSR Leathers case

CASE STUDY 20

Facts:
Cheque dishonoured; partial payment made after notice.

Answer:

(i) ✅ Complaint maintainable for balance
(ii) Liability survives

CASE STUDY 21

Facts:
Cheque amount exceeds actual debt.

Answer:

(i) ❌ Section 138 fails
(ii) Excess amount unenforceable

CASE STUDY 22

Facts:
Cheque issued for oral loan.

Answer:

(i) ✅ Section 138 applies
(ii) Presumption under Sections 118 & 139

CASE STUDY 23

Facts:
Cheque dishonoured due to technical alteration.

Answer:

(i) ❌ Cheque void
(ii) Material alteration invalidates instrument

CASE STUDY 24

Facts:
Cheque signed blank; later filled by payee.

Answer:

(i) ✅ Valid under Section 20
(ii) Presumption applies

CASE STUDY 25

Facts:
Cheque dishonoured; accused denies loan.

Answer:

(i) Presumption favours complainant
(ii) Accused must rebut on probability

CASE STUDY 26

Facts:
Cheque dishonoured; complainant lacks financial capacity.

Answer:

(i) Accused must raise probable defence
(ii) Mere suggestion insufficient

CASE STUDY 27

Facts:
Cheque dishonoured; accused does not lead evidence.

Answer:

(i) ❌ Not fatal
(ii) Cross-examination sufficient

CASE STUDY 28

Facts:
Cheque dishonoured; complaint filed in wrong jurisdiction.

Answer:

(i) ❌ Not maintainable
(ii) Must be filed where payee bank situated

CASE STUDY 29

Facts:
Cheque dishonoured; complainant dies.

Answer:

(i) ✅ Legal heirs may continue
(ii) Cause survives

CASE STUDY 30

Facts:
Cheque dishonoured; parties settle during trial.

Answer:

(i) ✅ Compounding allowed
(ii) Damodar Prabhu case

CASE STUDY 31

Facts:
Cheque dishonoured; appeal filed without deposit.

Answer:

(i) ❌ Appeal defective
(ii) 20% deposit mandatory

CASE STUDY 32

Facts:
Cheque dishonoured; accused absconds.

Answer:

(i) Trial may proceed
(ii) NBW may be issued

CASE STUDY 33

Facts:
Cheque dishonoured; cheque issued as gift.

Answer:

(i) ❌ No offence
(ii) No legally enforceable debt

CASE STUDY 34

Facts:
Cheque dishonoured; cash loan above ₹20,000.

Answer:

(i) ✅ Enforceable
(ii) Income-tax violation irrelevant

CASE STUDY 35

Facts:
Cheque dishonoured; accused claims coercion.

Answer:

(i) Accused must prove coercion
(ii) Presumption continues

CASE STUDY 36

Facts:
Cheque dishonoured; drawer deceased before trial.

Answer:

(i) ❌ Criminal liability abates
(ii) Civil remedy survives

CASE STUDY 37

Facts:
Cheque dishonoured; wrong cheque number mentioned in notice.

Answer:

(i) ❌ Defective notice
(ii) Complaint fails

CASE STUDY 38

Facts:
Cheque dishonoured; notice demanded interest only.

Answer:

(i) ❌ Invalid notice
(ii) Cheque amount must be demanded

CASE STUDY 39

Facts:
Cheque dishonoured; accused claims cheque lost.

Answer:

(i) Defence must be proved
(ii) Mere plea insufficient

CASE STUDY 40

Facts:
Cheque dishonoured; foreign cheque.

Answer:

(i) ❌ NI Act not applicable
(ii) Outside territorial scope

CASE STUDY 41

Facts:
Cheque dishonoured; accused pleads mental illness.

Answer:

(i) Must prove incapacity
(ii) Otherwise liable

CASE STUDY 42

Facts:
Cheque dishonoured; issued for partnership liability.

Answer:

(i) ✅ Firm + partners liable
(ii) If in charge of business

CASE STUDY 43

Facts:
Cheque dishonoured; accused repays after filing complaint.

Answer:

(i) Offence complete
(ii) May mitigate sentence

CASE STUDY 44

Facts:
Cheque dishonoured; complainant not payee but holder in due course.

Answer:

(i) ✅ Complaint maintainable
(ii) Section 9 applies

CASE STUDY 45

Facts:
Cheque dishonoured; account dormant.

Answer:

(i) ✅ Section 138 applies
(ii) Equivalent to insufficiency

CASE STUDY 46

Facts:
Cheque dishonoured; accused claims no mens rea.

Answer:

(i) ❌ Mens rea not required
(ii) Strict liability offence

CASE STUDY 47

Facts:
Cheque dishonoured; signature admitted but debt denied.

Answer:

(i) Presumption applies
(ii) Burden on accused

CASE STUDY 48

Facts:
Cheque dishonoured; complaint filed beyond limitation.

Answer:

(i) ❌ Unless delay condoned
(ii) Section 142(b)

CASE STUDY 49

Facts:
Cheque dishonoured; accused claims cheque issued under mistake.

Answer:

(i) Must prove mistake
(ii) Otherwise liable

CASE STUDY 50

Facts:
Cheque dishonoured; cheque issued as donation.

Answer:

(i) ❌ No offence
(ii) Absence of legally enforceable debt

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