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Section 138 of the Negotiable Instruments Act, 1881 deals with:

Section 138 applies when a cheque for a legally enforceable debt or other liability is returned unpaid for a qualifying reason, such as insufficient funds or exceeding the…

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Section 138 of the Negotiable Instruments Act, 1881 deals with:

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Answer and explanation

Correct answer C

Section 138 applies when a cheque for a legally enforceable debt or other liability is returned unpaid for a qualifying reason, such as insufficient funds or exceeding the amount arranged with the bank. The cheque must be presented within the applicable period, written demand must be made within 30 days of receiving bank information, and the drawer must fail to pay within 15 days of receiving the notice. RBI directions prescribe the ordinary three-month cheque validity period.

Option feedback

Option A

Incorrect. Section 12 defines a foreign instrument.

Option B

Incorrect. Section 119 provides the presumption on proof of protest.

Option C

Correct. Section 138 creates an offence for qualifying cheque dishonour subject to the statutory conditions.

Option D

Incorrect. Section 118 gives the general presumptions as to negotiable instruments.

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