NEGOTIABLE INSTRUMENTS ACT
ULTRA-TRICKY PROBLEM-BASED MAINS QUESTIONS & ANSWERS
Q1. (Security Cheque + Future Liability + Stop Payment)
A took a loan of ₹20 lakhs from B. At the time of loan agreement, A issued two post-dated cheques marked as “security”. Later, disputes arose and A issued stop-payment instructions. On presentation, the cheque was dishonoured with endorsement “payment stopped by drawer”. B files complaint under Section 138 NI Act.
Decide.
Answer:
Issues:
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Whether security cheque attracts Section 138
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Whether stop-payment dishonour is covered
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Whether legally enforceable debt existed
Law:
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Section 138 – Dishonour for insufficiency or other reasons
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Sections 118 & 139 – Presumption of debt
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Section 43(5) – Not relevant
Application:
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Merely labeling a cheque as “security” does not exclude Section 138
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If on date of presentation, debt had crystallized, offence is made out
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Stop-payment does not defeat liability if debt exists
Case-law:
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Sampelly Satyanarayana Rao v. IREDA (2016)
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Modi Cements v. Kuchil Kumar Nandi (1998)
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Laxmi Dyechem v. State of Gujarat (2012)
Conclusion:
Complaint is maintainable, subject to proof of enforceable debt.
Q2. (Blank Cheque + Different Ink + No Date)
X handed over a signed blank cheque to Y towards repayment of loan. Y filled in the amount, date and name using different ink. Cheque was dishonoured. X contends manipulation and denies liability.
Decide.
Answer:
Issue:
Whether filling up of blank cheque invalidates prosecution.
Law & Presumption:
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Section 20 – Inchoate instrument
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Section 139 – Presumption of debt
Case-law:
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Bir Singh v. Mukesh Kumar (2019)
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Rangappa v. Mohan (2010)
Principle:
✔️ Drawer giving signed cheque gives implied authority to fill details
✔️ Different ink or handwriting irrelevant
Conclusion:
Defence fails; complaint maintainable.
Q3. (Notice Returned Unclaimed + Accused Silent)
Cheque dishonoured on 1 March. Notice sent on 20 March to correct address. Postal endorsement: “Unclaimed”. Accused claims no notice served.
Decide.
Answer:
Law:
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Section 138(b) – Notice mandatory
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Section 27, General Clauses Act
Case-law:
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C.C. Alavi Haji v. Palapetty Muhammed (2007)
Principle:
Unclaimed/refused notice = deemed service.
Conclusion:
Statutory requirement satisfied; complaint valid.
Q4. (Company Not Arraigned + Director Alone)
Cheque issued by company. Complaint filed only against Managing Director. Company not made accused.
Decide.
Answer:
Law:
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Section 141 – Vicarious liability
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Company is principal offender
Case-law:
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Aneeta Hada v. Godfather Travels (2012)
Conclusion:
Complaint not maintainable; liable to be quashed.
Q5. (Cheque Issued to Time-Barred Debt)
Cheque issued in 2024 for a loan advanced in 2017, no acknowledgment in writing. Dishonoured.
Decide.
Answer:
Issue:
Whether time-barred debt is “legally enforceable”.
Law:
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Section 25(3), Contract Act
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Section 138 NI Act
Case-law:
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A.V. Murthy v. B.S. Nagabasavanna (2002)
Principle:
Cheque amounts to written promise to pay time-barred debt.
Conclusion:
Section 138 attracted.
Q6. (Death of Accused During Trial)
Accused dies during pendency of Section 138 proceedings. Complainant seeks substitution of legal heirs.
Decide.
Answer:
Law:
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Criminal liability is personal
Case-law:
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H.P. Housing Board v. Varinder Kumar Garg (2005)
Conclusion:
Proceedings abate; substitution impermissible.
Q7. (Cheque Dishonour + Moratorium under IBC)
Company under IBC moratorium. Cheque dishonoured. Complaint filed under Section 138.
Decide.
Answer:
Law:
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Section 14 IBC – Moratorium
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Section 138 NI Act
Case-law:
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P. Mohanraj v. Shah Brothers (2021)
Conclusion:
Proceedings stayed against company, may continue against directors (subject to facts).
Q8. (Payee Not Named + Bearer Cheque)
Cheque issued without mentioning payee’s name. Later filled by holder and dishonoured.
Decide.
Answer:
Law:
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Section 20 NI Act
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Section 139
Case-law:
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Bir Singh v. Mukesh Kumar (2019)
Conclusion:
Valid instrument; Section 138 applies.
Q9. (Partial Payment Before Presentation)
Drawer paid part amount before presentation of cheque but payee presented cheque for full amount.
Decide.
Answer:
Law:
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Legally enforceable debt must exist to the extent of cheque amount
Case-law:
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Alliance Infrastructure v. Vinay Mittal (2010)
Conclusion:
Complaint not maintainable for excess amount.
Q10. (Cheque Lost + FIR + Stop Payment)
Drawer lodged FIR regarding lost cheque and instructed bank to stop payment. Cheque later presented by payee.
Decide.
Answer:
Law:
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Presumption under Section 139
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Stop payment not a defence per se
Case-law:
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Rangappa v. Mohan (2010)
Conclusion:
Accused must prove misuse; mere FIR insufficient.
🔥 EXAMINER-PLEASING STRATEGY
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Frame Issues → Law → Case-law → Conclusion
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Quote latest SC judgments
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Avoid emotional language; write judicial