Mr. Y issued a cheque for ₹ 10,000 to Mr. Z which was dishonoured by the Bank because Y did not have enough funds in his account and has no authority to overdraw. Examine as per the provisions of the Negotiable Instruments Act, 1881 whether-\ni) Mr. Y is liable for dishonour of cheque, if yes, what are the consequences for such an offence?\nii) What would be your answer if Y issued a cheque as a donation to Mr. Z?
Dishonour of Cheque for Insufficiency, Etc., of funds in the accounts [Section 138 of the Negotiable Instruments Act, 1881]\nNote: Law – Same as Q.N - 19
ii) A cheque given as gift or donation, or as a security or in discharge of a mere moral obligation, or for an illegal consideration, would be outside the purview of this section.
In the instant case,
i) Since Y’s cheque was dishonoured by the Bank due to insufficiency of funds in his account, he shall be deemed to have committed an offence and shall, be punished with imprisonment for a term which may extend to two years, or with fine which may extend to Rs. 20,000, or with both.
Hence, if Y issued a cheque as a donation to Mr. Z, he shall not be liable under section 138 of the Act.
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