NEGOTIABLE INSTRUMENTS ACT

ULTRA-TRICKY PROBLEM-BASED MAINS QUESTIONS & ANSWERS

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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:

1. Whether security cheque attracts Section 138

2. Whether stop-payment dishonour is covered

3. Whether legally enforceable debt existed

Law:

• Section 138 – Dishonour for insufficiency or other reasons

• Sections 118 & 139 – Presumption of debt

• Section 43(5) – Not relevant

Application:

• Merely labeling a cheque as “security” does not exclude Section 138

• If on date of presentation, debt had crystallized, offence is made out

• Stop-payment does not defeat liability if debt exists

Case-law:

• Sampelly Satyanarayana Rao v. IREDA (2016)

• Modi Cements v. Kuchil Kumar Nandi (1998)

• Laxmi Dyechem v. State of Gujarat (2012)

Conclusion:

Complaint is maintainable, subject to proof of enforceable debt.

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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:

• Section 20 – Inchoate instrument

• Section 139 – Presumption of debt

Case-law:

• Bir Singh v. Mukesh Kumar (2019)

• 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.

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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:

• Section 138(b) – Notice mandatory

• Section 27, General Clauses Act

Case-law:

• C.C. Alavi Haji v. Palapetty Muhammed (2007)

Principle:

Unclaimed/refused notice = deemed service.

Conclusion:

Statutory requirement satisfied; complaint valid.

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Q4. (Company Not Arraigned + Director Alone)

Cheque issued by company. Complaint filed only against Managing Director. Company not made accused.
Decide.

Answer:

Law:

• Section 141 – Vicarious liability

• Company is principal offender

Case-law:

• Aneeta Hada v. Godfather Travels (2012)

Conclusion:

Complaint not maintainable; liable to be quashed.

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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:

• Section 25(3), Contract Act

• Section 138 NI Act

Case-law:

• A.V. Murthy v. B.S. Nagabasavanna (2002)

Principle:

Cheque amounts to written promise to pay time-barred debt.

Conclusion:

Section 138 attracted.

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Q6. (Death of Accused During Trial)

Accused dies during pendency of Section 138 proceedings. Complainant seeks substitution of legal heirs.
Decide.

Answer:

Law:

• Criminal liability is personal

Case-law:

• H.P. Housing Board v. Varinder Kumar Garg (2005)

Conclusion:

Proceedings abate; substitution impermissible.

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Q7. (Cheque Dishonour + Moratorium under IBC)

Company under IBC moratorium. Cheque dishonoured. Complaint filed under Section 138.
Decide.

Answer:

Law:

• Section 14 IBC – Moratorium

• Section 138 NI Act

Case-law:

• P. Mohanraj v. Shah Brothers (2021)

Conclusion:

Proceedings stayed against company, may continue against directors (subject to facts).

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Q8. (Payee Not Named + Bearer Cheque)

Cheque issued without mentioning payee’s name. Later filled by holder and dishonoured.
Decide.

Answer:

Law:

• Section 20 NI Act

• Section 139

Case-law:

• Bir Singh v. Mukesh Kumar (2019)

Conclusion:

Valid instrument; Section 138 applies.

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Q9. (Partial Payment Before Presentation)

Drawer paid part amount before presentation of cheque but payee presented cheque for full amount.
Decide.

Answer:

Law:

• Legally enforceable debt must exist to the extent of cheque amount

Case-law:

• Alliance Infrastructure v. Vinay Mittal (2010)

Conclusion:

Complaint not maintainable for excess amount.

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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:

• Presumption under Section 139

• Stop payment not a defence per se

Case-law:

• Rangappa v. Mohan (2010)

Conclusion:

Accused must prove misuse; mere FIR insufficient.

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🔥 EXAMINER-PLEASING STRATEGY

• Frame Issues → Law → Case-law → Conclusion

• Quote latest SC judgments

• Avoid emotional language; write judicial