Sale of Goods, Negotiable Instruments and Partnership — Practice

Question 1

What is the punishment under Section 138 of the NI Act?

Accepted Answer

Imprisonment up to two years, or a fine up to twice the cheque amount, or both.

Question 2

Name the unpaid seller's three rights against the goods.

Accepted Answer

Lien, stoppage in transit and resale.

Question 3

Distinguish a condition from a warranty under Section 12.

Accepted Answer

A condition goes to the root of the contract and its breach allows the buyer to repudiate it. A warranty is collateral and its breach gives only a claim for damages. A condition may be treated as a warranty where the buyer elects to accept the goods.

Question 4

Explain the presumptions under Sections 118 and 139 of the NI Act.

Accepted Answer

Section 118 presumes that a negotiable instrument was made for consideration. Section 139 presumes that the cheque was issued for the discharge of a debt or liability. Both are rebuttable on the balance of probabilities, and the accused need not give evidence to rebut them.

Question 5

State the essentials of a partnership under Section 4.

Accepted Answer

An agreement between persons to share the profits of a business carried on by all or any of them acting for all, which gives the elements of agreement, business, profit sharing and mutual agency.

Question 6

A cheque for Rs 5 lakh is dishonoured on 1 March. The payee receives the bank memo on 3 March and sends a demand notice on 25 March. The drawer does not pay, and the payee files a complaint on 30 April. Is it maintainable?

Accepted Answer

The notice was sent within 30 days of receiving the memo on 3 March, so it is valid. The drawer had 15 days from receipt of the notice to pay, and the cause of action arose after that period. The complaint must be filed within one month of the cause of action, and 30 April falls within that month, so it is maintainable if the debt was legally enforceable, which Section 139 presumes.

Question 7

State the rule of nemo dat and its exceptions.

Accepted Answer

No one can give a better title than he has (Section 27). Exceptions protect an innocent buyer: sale by a mercantile agent in the ordinary course, sale by a person in possession under a voidable title not yet avoided (Section 29), sale by a seller in possession after sale (Section 30), and sale by a joint owner in possession with consent.

Question 8

Where can a Section 138 complaint be filed after the 2015 amendment?

Accepted Answer

In the court within whose local limits the payee's bank account is maintained, under Section 142(2).

Practice — Sale of Goods, Negotiable Instruments and Partnership

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