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CA FOUNDATION BRAHMASTRA 2.0 |LAW| NEGOTIABLE INSTRUMENT ACT |LECTURE 25|CA ANKITA PATNI

Swapnil Patni CA Classes・2 minutes read

The session highlights section 138 of the Negotiable Instruments Act, emphasizing the bouncing of checks and the importance of issuing them for legally enforceable debts. It explains the validity period of checks, the responsibilities of holders, and the legal consequences for bounced checks, underlining the significance of timely presentation.

Insights

  • Section 138 of the Negotiable Instruments Act is crucial as it deals with the bouncing of checks, emphasizing the importance of checks as a negotiable instrument and the legal consequences, including fines and imprisonment, for bounced checks issued for legally enforceable debts.
  • Understanding sections 138, 139, and 140 is essential in check issuance and legal implications, as they specify that a check should only be issued for a legally enforceable debt, prohibit using insufficient funds as an excuse for check dishonor in court, and outline the necessary criteria for promissory notes to be considered valid, including delivery, endorsement, and presentation for acceptance.

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Recent questions

  • What is the significance of section 138?

    Section 138 focuses on bounced checks.

  • How long is the validity period of a check?

    Three months.

  • What are the consequences of a bounced check?

    Fines and imprisonment.

  • What actions should be taken if a check bounces?

    Notice of dishonor within 30 days.

  • What are the key points of sections 139 and 140?

    Legally enforceable debts and insufficient funds.

Related videos

Summary

00:00

"Check Bouncing: Legal Consequences and Validity"

  • The session focuses on the Negotiable Instruments Act, highlighting section 138 as crucial.
  • Section 138 pertains to the bouncing of checks, emphasizing the importance of checks as a negotiable instrument.
  • The text explains the significance of legally enforceable debts in relation to check issuance.
  • It details the process of issuing a check, including the roles of the drawer and the holder.
  • The validity period of a check is three months, after which it becomes stale and outdated.
  • The Limitation Act 1963 and the Banking Regulation Act specify the validity of checks for three months.
  • The responsibility of the holder includes presenting the check within its validity period for payment.
  • The presentation for payment must occur within three months or the validity period, whichever is earlier.
  • The text underscores the transferability of negotiable instruments and the importance of timely presentation.
  • It stresses the legal consequences, including fines and imprisonment, for bounced checks issued for legally enforceable debts.

20:36

"Check Bounced: Legal Action Possible"

  • The check was presented after 6 months, leading to a bounced check due to insufficient funds.
  • Tanisha presented the check to her banker within its validity period.
  • The check was dishonored, and Tanisha's banker informed her about the bounced check.
  • The reason for the dishonor was insufficient funds, and stop payment was also mentioned.
  • Tanisha had to give a notice of dishonor to the issuer within 30 days.
  • The notice allowed a 15-day grace period for payment to be made.
  • Failure to pay within 15 days could lead Tanisha to take legal action within a month.
  • Tanisha could file a complaint in court after 45 days of dishonor if payment was not made.
  • The section did not explicitly mention stop payment, but it was covered in an example.
  • Stop payment could also attract section 138 if the check was dishonored due to it.

43:47

Legal Implications of Check Issuance and Promissory Notes

  • A check should only be issued for a legally enforceable debt, not as a gift or charity, as per sections 139 and 140.
  • Section 140 prohibits using the excuse of insufficient funds leading to check dishonor in court.
  • Understanding sections 138, 139, and 140 is crucial in check issuance and legal implications.
  • Promissory notes must fulfill specific criteria to be considered valid, including a payee's name and date.
  • A promissory note must be a written, unconditional promise to pay a certain sum of money.
  • The RBI Act prohibits bearer promissory notes to prevent them from acting as currency notes.
  • Delivery and endorsement are essential for the negotiation of checks and promissory notes.
  • Half delivery of a promissory note does not constitute complete delivery, affecting its validity.
  • The completion of a promissory note requires full delivery to the payee.
  • Presentation for acceptance is necessary for demanding money from negotiable instruments like promissory notes, bills of exchange, or checks.

01:12:28

Negotiable Instruments: Acceptance, Maturity, and Presentation

  • Bill of Exchange is the only instrument requiring acceptance, with two types: payable after date or after sight.
  • Maturity of a bill is calculated from the date of acceptance, with three days of grace added before withdrawal.
  • Demanding money post-maturity requires a reasonable time and place, typically during business hours.
  • Presenting a bill for payment at a specific place is crucial; failure to do so results in dishonor.
  • Promissory notes are payable after sight, necessitating presentation to the maker within a reasonable time.
  • Failure to present a promissory note within the stipulated time leads to non-creation of the instrument.
  • Acceptance of a bill of exchange must occur within two days, allowing the drawer to fulfill the payment obligation.
  • All negotiable instruments, including bills of exchange, promissory notes, and cheques, must be presented for payment to the maker.
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