MODEL NEGOTIABLE LAW MAINS EXAMINATION
Time: 3 Hours
Maximum Marks: 100
INSTRUCTIONS
-
All questions are compulsory.
-
Answers must be precise, legal, and supported by case-law.
-
Credit will be given for structure, clarity, and authority.
SECTION – A (20 MARKS)
(Answer any TWO – 10 marks each)
Q1. Discuss the scope and object of Section 138 of the Negotiable Instruments Act. What are the essential ingredients of the offence?
Model Answer
Object:
Section 138 was inserted to enhance the credibility of commercial transactions and to ensure faith in banking operations.
Essential Ingredients (Kusum Ingots v. Pennar Peterson, 2000):
-
Cheque drawn by accused on account maintained by him
-
Issued for legally enforceable debt or liability
-
Presentation within validity period
-
Dishonour due to insufficiency of funds or analogous reasons
-
Statutory notice within 30 days
-
Failure to pay within 15 days
Nature:
Strict liability offence with rebuttable presumptions under Sections 118 and 139.
Q2. Explain the concept of presumption under Sections 118 and 139 of the Negotiable Instruments Act. How can the accused rebut such presumption?
Model Answer
Presumptions:
-
Section 118(a): Presumption of consideration
-
Section 139: Presumption that cheque was issued for discharge of debt
Nature:
Mandatory but rebuttable.
Standard of Proof:
Preponderance of probability, not beyond reasonable doubt.
Case-law:
-
Rangappa v. Mohan (2010) – Presumption includes existence of debt
-
Basalingappa v. Mudibasappa (2019) – Accused can rely on complainant’s evidence
SECTION – B (30 MARKS)
(Answer any TWO – 15 marks each)
Q3. Discuss vicarious liability of directors under Section 141 of the Negotiable Instruments Act with the help of judicial precedents.
Model Answer
Principle:
Criminal liability is personal; vicarious liability must be specifically pleaded and proved.
Conditions (SMS Pharmaceuticals v. Neeta Bhalla, 2005):
-
Company must be accused
-
Accused must be in charge of and responsible for conduct of business
-
Basic averment mandatory
Managing Director:
Deemed liable.
Landmark Case:
Aneeta Hada v. Godfather Travels (2012) – Company must be arraigned.
Conclusion:
Mechanical impleadment of directors impermissible.
Q4. Whether dishonour of cheque for “stop payment” instructions attracts Section 138 of the NI Act? Discuss with case-law.
Model Answer
Yes, if legally enforceable debt exists.
Case-law:
-
Modi Cements v. Kuchil Kumar Nandi (1998)
-
Laxmi Dyechem v. State of Gujarat (2012)
Principle:
Drawer cannot defeat Section 138 by issuing stop-payment instructions after issuing cheque.
SECTION – C (30 MARKS)
(Problem-Based – Answer any ONE)
Q5. CASE STUDY (30 MARKS)
A Pvt. Ltd. company issued a cheque through its Managing Director towards repayment of loan. The cheque was dishonoured with endorsement “account closed”. Notice was sent but returned “unclaimed”. Complaint was filed only against the Managing Director, not the company. During trial, the accused pleaded that the cheque was issued as security.
Decide the maintainability of the complaint.
Model Answer
Issues:
-
Whether account closed dishonour attracts Section 138
-
Validity of notice
-
Liability of Managing Director without company
-
Effect of security cheque
Findings:
-
Dishonour:
Account closed is covered (Laxmi Dyechem). -
Notice:
Unclaimed notice = deemed service (C.C. Alavi Haji). -
Company not arraigned:
Complaint not maintainable (Aneeta Hada). -
Security cheque:
Covered if liability exists (Sampelly Satyanarayana Rao).
Conclusion:
Complaint liable to be dismissed for non-impleadment of company.
SECTION – D (20 MARKS)
(Answer ALL – 5 marks each)
Q6. What is the effect of death of the accused during pendency of Section 138 proceedings?
Answer:
Proceedings abate; criminal liability is personal.
(H.P. Housing Board v. Varinder Kumar Garg)
Q7. Whether proceedings under Section 138 can continue during IBC moratorium?
Answer:
Stayed against company; may continue against directors.
(P. Mohanraj v. Shah Brothers, 2021)
Q8. Whether a cheque issued for time-barred debt attracts Section 138?
Answer:
Yes. Cheque amounts to written promise under Section 25(3) Contract Act.
(A.V. Murthy v. B.S. Nagabasavanna)
Q9. Whether offence under Section 138 is compoundable?
Answer:
Yes, at any stage under Section 147.
(Damodar S. Prabhu v. Sayed Babalal