Amol gives an NGO a cheque for Rs. 1,000 as a purely gratuitous donation. The cheque is returned unpaid…
Section 138 applies to a cheque drawn in discharge, in whole or in part, of a legally enforceable debt or other liability. A cheque given solely as a gratuitous donation…
Choose your answer
Amol gives an NGO a cheque for Rs. 1,000 as a purely gratuitous donation. The cheque is returned unpaid for insufficient funds. What is the effect of the gratuitous purpose under section 138 of the Negotiable Instruments Act, 1881?
Answer and explanation
Correct answer B
Section 138 applies to a cheque drawn in discharge, in whole or in part, of a legally enforceable debt or other liability.
A cheque given solely as a gratuitous donation does not meet that condition. The defect concerns the purpose of the cheque, regardless of the payee's status or the number of dishonours.
Option feedback
Option A
Insufficient funds is a stated dishonour ground, but the section also requires a qualifying debt or liability.
Option B
The gratuitous donation is outside the stated statutory condition.
Option C
The payee's status as an NGO does not itself defeat standing. The defect here is the absence of an enforceable obligation.
Option D
The Act does not require two dishonours and a second one would not create a qualifying debt.
Practice for these exams
-
All India Bar Examination (AIBE)
Subject revision
See pack details on LawMint.net -
UGC NET Law
Subject revision
See pack details on LawMint.net -
Tamil Nadu Judicial Services
-
CUET PG Law (LL.M.)
Subject revision