1. THE CONSUMER PROTECTION ACT,
1986 AND NEGOTIABLE
INSTRUMENT ACT,1881
AABIL HUSAIN
ASSISTANT PROFESSOR
PRESTIGE INSTITUTE OF MANAGEMENT &
RESEARCH, GWALIOR

2. The Consumer Protection Act, 1986
In order to protect the interest of the Consumer number of legislations are
enacted. One of the most important social security legislation is The
Consumer Protection Act, 1986. Which is came into force from 15th
March , 1987 and Applicable Whole of India except J&K.
Let us know the provisions of the legislation i.e. the rights of consumers, legal
provisions and mechanism for settlement of consumer grievances, and see
the changes as per New Act i.e. The Consumer Protection Act, 2019
Objective
Act is to provide for better protection of the interests of consumers and for
that purpose to make provision for the establishment of consumer
councils and other authorities for the settlement of consumers' disputes,
namely
1.District Consumer Dispute Redressal Forum,
2.State Consumer Dispute Redressal Commission and
3.National Consumer Dispute Redressal Commission.

3. DEFINITIONS (SECTION 2)
Section 2 (d) “Consumer”
Consumer means any person who- (i) buys any goods for a consideration
which has been paid or promised or partly paid and partly promised, or
under any system of deferred payment and includes any user of such
goods other than the person who buys such goods for consideration paid
or promised or partly paid or partly promised, or under any system of
deferred payment when such use is made with the approval of such
person, but does not include a person who obtains such goods for resale
or for any commercial purpose.
(ii) hires or avails of any services for a consideration which has been paid or
promised or partly paid and partly promised, or under any system of
deferred payment and includes any beneficiary of such services other than
the person who 1[hires or avails of] the services for consideration paid or
promised, or partly paid and partly promised, or under any system of
deferred payments, when such services are availed of with the approval of
the first-mentioned person.

4. DEFINITIONS (SECTION 2)
Section 2(e) "consumer dispute" means a dispute where the person against
whom a complaint has been made, denies or disputes the allegations
contained in the complaint;
Section 2 (f) "defect" means any fault, imperfection or shortcoming in the
quality, quantity, potency, purity or standard which is required to be
maintained by or under any law for the time being in force or under any
contract, express or implied, or as is claimed by the trader in any manner
whatsoever in relation to any goods.
Example: Turmeric powder sold with mixture of yellow color.
Section 2 (g) "deficiency" means any fault, imperfection, shortcoming or
inadequacy in the quality, nature and manner of performance which is
required to be maintained by or under any law for the time being in force
or has been undertaken to be performed by a person in pursuance of a
contract or otherwise in relation to any service.
Example: A passenger traveled in a deluxe bus but the seat was very much
uncomfortable.

5. Goods and Services
The term ‘goods’ under this Act has the same meaning as
under the sale of goods Act. Accordingly it covers all
types of movable property other than money and
includes stocks and shares, growing crops, etc.
The term ‘service’ means service of any description
made available to potential users and includes banking,
financing, housing construction, insurance,
entertainment, transport, supply of electrical and other
energy, boarding and lodging, amusement, etc.
The services of doctors, engineers, architects, lawyers etc.
are included under the provisions of Consumer
Protection Act.

6. Salient Features of the C.P.Act,1986
This Act is applicable on all the products and services, until or unless any product or
service is especially debarred out of the scope of this Act by the Central
Government.
This Act is applicable to all the areas whether private, public or cooperative.
Three-tier Grievances Redressal Machinery:
Consumer courts have been established so that the consumers can enjoy their rights.
This Act presents Three- tier Grievances Redressal Machinery:
(i) At District Level-District Forum
(ii) At State Level -State Commission
(iii) At National Level – National Commission
• To favor consumer protection and to encourage consumer’s awareness there is a
provision in this Act to establish Consumer Protection Councils.
• A main feature of the Act is that under this, the cases are decided in a limited time
of period.

7. Who can file a complaint?
The following persons can file a complaint under Consumer Protection Act,
1986:
(a) a consumer;
(b) any recognised voluntary consumer association whether the consumer is a
member of that association or not.
(Ex. Consumer Organisations-
(1) CERC (Consumer Education and Research Centre), Ahmedabad
(2) VOICE (Voluntary Organization in the of Consumer Education), New
Delhi,
(3) Consumer Education Center, Hyderabad, Interest
(4) Common Causes, New Delhi, etc.
(c) the Central or any State Government;
(d) one or more consumers where these are numerous consumers having
same interest, and
(e) Legal heir or representative in case of death of a consumer.

8. Agencies to settle the Consumer
Disputes
• District consumer Dispute Redressal Forum
(District Forums) at the district level.
• State Consumer Disputes Redressal
Commission (State Commission) at state
levels, and
• National Consumer Disputes Redressal
Commission (National Commission) at
National level .

9. District Forum
• This is established by the state governments in each of its
districts.
• (a) Composition: The district forums consist of a Chairman
and two other members one of whom shall be a woman.
The district forums are headed by the person of the rank of
a District Judge.
• (b) Jurisdiction: A written complaint can be filed before the
District Consumer forum where the value of goods or
services and the compensation claimed does not exceed Rs.
20 lakh.
• Appeal: If a consumer is not satisfied by the decision of the
District forum, he can challenge the same before the State
Commission, within 30 days of the order

10. State Commission
• This is established by the state governments in their respective
states.
• (a) Composition: The State Commission consists of a President and
not less then two and not more than such number of members as
may be prescribed, one of whom shall be a women. The
Commission is headed by a person of the level of High Court judge.
• (b) Jurisdiction: A written complaint can be filed before the State
Commission where the value of goods or services and the
compensation claimed exceeds Rs. 20 lakh but does not exceed Rs.
One crore.
• (c) Appeal: In case the aggrieved party is not satisfied with the
order of the State Commission he can appeal to the National
Commission within 30 days of passing of the order.

11. National Commission
• The National commission was constituted in 1988 by the central government. It is
the apex body in the three tier judicial machinery set up by the government for
redressal of consumer grievances. Its office is situated at Janpath Bhawan (Old
Indian Oil Bhawan), A Wing, 5th Floor, Janpath, New Delhi.
• (a) Composition: It consists of a President and not less than four and not more
than such members as may be prescribed, one of whom shall be a woman. The
National Commission is headed by a sitting or retired judge of the Supreme Court.
• (b) Jurisdiction: All complaints pertaining to those goods or services and
compensation whose value is more than Rs. one crore can be filed directly before
the National Commission.
• (c) Appeal: An appeal can be filed against the order of the National Commission to
the Supreme Court within 30 days from the date of order passed.
• It may be noted that in order to attain the objects of the Consumers Protection
Act, the National Commission has also been conferred with the powers of
administrative control over all the State Commissions by calling for periodical
returns regarding the institution, disposal and pending of cases and issuing
instructions for adoption of uniform procedures, etc.

12. What are the reliefs available to
consumers?
Depending on the nature of complaint the and relief sought by the
consumer, and the facts of the case, the Redressal Forum/Commission may
order one or more of the following reliefs:
(a) Removal of defects from the goods or deficiencies in services in question.
(b) Replacement of the defective goods.
(c) Refund of the price paid.
(d) Award of compensation for loss or injury suffered.
(e) Discontinuance of unfair trade practices or restrictive trade practice
or not to repeat them.
(f) Withdrawal of hazardous or dangerous goods from being offered for
sale.
(g) Provision of adequate costs to aggrieved parties.

13. The Consumer Protection Act, 2019
(Act No. 35 OF 2019)
The Digital Era of commerce and digital
branding, as well as a new set of customer
expectations, digitization has provided easy
access, a large variety of choice, convenient
payment mechanisms, improved services and
shopping as per convenience. However, along
the growth path it also brought in challenges
related to consumer protection.

14. • Keeping this in mind and to address the new set
of challenges faced by consumers in the digital
age, the Indian Parliament, passed the landmark
Consumer Protection Act, 2019 which aims to
provide the timely and effective administration
and settlement of consumer disputes.
• The Consumer Protection Act, 2019 (New Act)
replace the more than 3 (three) decades old
Consumer Protection Act,1986 (Act).

15. The Consumer Protection Act, 2019
Key Highlights
• Widened the definition of 'consumer‘: The definition now
includes any person who buys any goods, whether through
offline or online transactions, electronic means,
teleshopping, direct selling or multi-level marketing.
• Enhancement of Territorial Jurisdiction: The 2019 Act now
provides an added advantage to the consumers by
providing for filing of complaints where the complainant
resides or personally works for gain as against the 1986 Act
which only provides for filing of complaint where the
opposite party resides or carry on business. This would help
in removing the difficulties faced by the consumers in
seeking redressal of their grievances against businesses
who may not have an office or branch in their state.

16. Enhancement of Pecuniary
Jurisdiction
• Revised pecuniary limits have been fixed under the
New Act. Accordingly, the district forum can now
entertain consumer complaints where the value of
goods or services paid does not exceed INR 10,000,000
(Indian Rupees Ten Million).(i.e. one Crore)
• The State Commission can entertain disputes where
such value exceeds INR 10,000,000 (Indian Rupees Ten
Million) but does not exceed INR 100,000,000 (Indian
Rupees One Hundred Million), and
• The National Commission can exercise jurisdiction
where such value exceeds INR 100,000,000 (INR One
Hundred Million)(i.e.10 Crores).

17. Negotiable Instrument Act, 1881
Introduction
• The Negotiable Instruments Act was enacted
in India in 1881, prior to its enactment, the
provisions of the English Negotiable
Instrument Act were applicable in India and
the present Act is also based on the English
act with certain modifications.
• The Act is applicable to whole of India and to
all persons resident in India, whether
foreigner or Indian.

18. Meaning of Negotiable Instrument
• Negotiable means transferable and Instrument is
a written document which creates a right in favor
of any person.
• Therefore, a negotiable instrument is a written
document which creates a rights in favor of any
person and which is transferable by delivery.
• According to Section 13(1) of N I Act, 1881 as
Follows- “A negotiable instrument means a
promissory note, bill of exchange or Cheque.”

19. Essential Characteristics of a Negotiable
Instrument
1) Written
A negotiable instrument is a written document.
It can never be oral.
2) Freely Transferable or Negotiability
The property of the instrument can be
transferred freely from one person to another
by delivery. In the case of a bearer instrument,
the property passes by mere delivery to the
transferee. On the contrary in the case of an
order instrument, endorsement and delivery are
required for the transfer of property.

20. Essential Characteristics of a
Negotiable Instrument
3) Signature
A negotiable instrument is complete and effective
only when it is duly signed. Signature may be on
any part of the instrument.
4) Title of holder is free from all defects
A person who takes negotiable instrument
bonafide and for value, he is known as holder in
due course gets the instrument free from all
defects in title of the transfer.
 He is not in any way affected by any defects in
the title of the transferor or any prior party.

21. Essential Characteristics of a
Negotiable Instrument
5) Right to sue in his own name
The holder in course has the right to sue on the negotiable
instrument in his own name for recovering the amount.
A negotiable instrument can be transferred any number of
times till its maturity and the holder of the in instrument
need not to give any notice of transfer to the debtor.
6) Unconditional
A negotiable instrument is always unconditional. A promise
to pay or an order to pay in a negotiable instrument must
be unconditional.
7) Payment in money
A negotiable instrument must payable only in money and
that to in legal tender money of India.

22. Essential Characteristics of a
Negotiable Instrument
8) Payable to order or bearer
A negotiable instrument may be payable either to
order or bearer.
9) Substitute for Money
The status of negotiable instrument is equivalent to
cash as even before the date of its maturity, it can be
encashed from a banker on discount.
10) Certain sum of money
A negotiable instrument is valid only when it is drawn
for a certain sum of money in order to ensure free
negotiability of any negotiable instrument.

23. Presumptions as to Negotiable
Instruments
1) Consideration
2) Date
3) Time of acceptance
4) Time of transfer
5) Stamp
6) Proof of protest

24. Types of Negotiable Instrument
• According to Section 13(1) of N I Act, 1881 as
Follows- “A negotiable instrument means a
promissory note, bill of exchange or Cheque.”
• Though the Act speaks of only three kinds of
negotiable instruments, it does not mean that
three can’t be any other negotiable instruments.
For Example- Hundis, treasury bills, bankers draft,
share warrants, bearer warrants, bearer
debentures.

25. Types of Negotiable Instrument
1) PROMISSORY NOTE
“ A promissory note is an instrument in writing
(not being a bank note or a currency note)
containing an unconditional undertaking,
signed by the maker to pay a certain sum of
money to, or to the order of, a certain person
or to the bearer of the instrument.”(Section
4)

26. Types of Negotiable Instrument
Parties to a Promissory Note
There are primarily two parties involved in a promissory note. They are:
(i) Maker or Drawer: he is the person who makes the promissory note in
which he promises to pay another person a fixed sum of money. He is the
debtor.
(ii) Payee – he is the person who has to receive the payment for the
promissory note. He is the creditor
In course of transfer of a promissory note by payee and others, the parties
involved may be –
(a) Endorser – he is the holder of promissory note who endorses it in favour
of another person.
(b) Endorsee – he is the person in whose name the promissory note has
been endorsed.

27. Types of Negotiable Instrument
Essentials or Characteristics of a Promissory Note
(1) In writing
(2) Express promise to pay- (I am liable to pay 900 to Mr. Rishi.)
(3) Unconditional- I promise to pay Rs, 6000 on Z death.
(4) Signed by the Maker
(5) Certain Parties (both)
(6) Certain sum of money
(7) Promise to pay money only
(8) Number, place, date
(9) It may be payable in installments
(10) It may be payable on demand or after a definite period
(11) It must be duly stamped under the Indian Stamp Act

28. Specimen of a Promissory Note
Rs 10,000
New Delhi – 110001
Dec 27 , 2022
On demand [or six months after date] I promise to pay X
or order the sum of rupees ten thousand with interest at 12
per cent per annum only for value received.
To X Sd/-A
Address……….. Stamp

29. Types of Negotiable Instrument
2) BILL OF EXCHANGE
A 'bill of exchange' is defined by as an
instrument in writing, containing an
unconditional order, signed by the maker,
directing a certain person to pay a certain sum
of money only to or to the order of, a certain
person, or to the bearer of the instrument.
(Section 5)

30. Parties to a Bill of Exchange
1) Drawer – the drawer is the person who makes the bill of exchange.
He is the creditor.
2) Drawee – The drawee is the person to whom the negotiable
instrument has been drawn. He is the debtor.
is made. He is generally a debtor of the drawer.
The drawer can also draw a bill in his own name thereby he himself
becomes the payee. Here the words in the bill would be Pay to us or
order.
In a bill where a time period is mentioned, is called a Time Bill.
But a bill may be made payable on demand also. This is called a
Demand Bill.

31. Characteristic Features of a Bill of Exchange
1. It must be in writing.
2. It must contain an order to pay and not a promise or
request.
3. The order must be unconditional.
5. The parties must be certain.
6. It must be signed by the drawer.
7. The sum payable must be certain or capable of being made
certain.
8. The order must be to pay money and money alone.
9. It must be duly stamped as per the Indian Stamp Act.
10. Number, date and place are not essential.

32. Specimen of a Bill of Exchange
Rs. 10,000/- May 2,2001
New Delhi
Five months after date pay Tarun or (to his) order the sum of
Rupees Ten Thousand only for value received.
To…... Accepted Stamp
Sameer Sameer S/d
Address Rajiv (Drawer)
(Drawee)

33. 3) CHEQUE
The Negotiable Instruments Act, 1881 Section 6
defines “a cheque as a bill of exchange drawn on
a specified banker and not expressed to be
payable otherwise than on demand.”
Actually, a cheque is an order by the account
holder of the bank directing his banker to pay on
demand, the specified amount, to or to the order
of the person named therein or to the bearer.

34. Features of a cheque
1) A cheque must be in writing and duly signed by the drawer.
2) A cheque has three parties – Drawer, Drawee and Payee
3) It contains an unconditional order.
4) It is issued on a specified banker only.
5) The amount specified is always certain and must be clearly
mentioned both in figures and words.
6) The payee is always certain.
7) It is always payable on demand.
8) The cheque must bear a date otherwise it is invalid and shall not be
honoured by the bank.
9) Electronic form

35. Specimen of a Cheque
………......20.......
Pay……..............................................................................................................
……....................................................................................................... or
Bearer
Rupees………………………………………………
……………………………………………………
STATE BANK OF INDIA
Jawaharlal Nehru University, New Delhi – 110067
6 5 3 0 0 3 1 1 0 0 0 2 0 5 6 1 0

36. Differences between
Bill of Exchange & Promissory Notes
Promissory Note
• It contains an unconditional
promise.
• There are 2 parties – the
maker or Drawer & the
payee.
• It is made by the debtor.
• Acceptance is not required.
• The liability of the
maker/drawer is primary &
absolute.
Bill of Exchange
• It contains an unconditional
order.
• There are 3 parties – the
maker or drawer, the drawee
& the payee.
• It is made by the creditor.
• Acceptance by the drawee is a
must.
• The liability of the
maker/drawer is secondary &
conditional upon non-payment
by the drawee.

37. Distinction between
a Cheque and a Bill of Exchange
Cheque
• It is drawn only on a banker.
• The amount is always
payable on demand.
• It can be crossed to end its
negotiability.
• Acceptance is not required.
Bill of Exchange
• It can be drawn on anybody
including a banker.
• The amount is payable on
demand or after a specified
period.
• It cannot be crossed.
• Acceptance is a must.

38. Holder (section8) 1/2
• Any person who is legally entitled to the possession of
a negotiable instrument and receive the payment
thereof on the due date is known as its holder.
• There fore in order to be a holder a person should
posses the following two rights.
1) He should be entitled to the possession of the
instrument in his own name (whether as bearer or as
payee or endorsee)
Example- an agent entrusted with an instrument of the
principal for safe-keeping is not entitled to its
possession in his own name.

39. 2/3
2) He should be entitled to receive the payment
in his own name. Therefore if a person is in
the possession of a negotiable instrument but
is not entitled to receive payment thereon.
Example- a thief or the finder of a lost
instrument such person is not a holder of the
instrument.

40. 3/3
EXAMPLE-
A promissory note is drawn as payable to A or to his order
then A will be the holder thereof as soon as the
instrument comes in his possession. If A gives the
instrument to B for safe-keeping then B is not the
holder thereof even if he is in possession of the
instrument. This is so because A has not endorsed the
instrument in favor of B and B can not file a suit for the
recovery of the amount of the instrument. If however
A had endorsed the instrument in favor of B then B
would have been the holder thereof.

41. Holder in Due Course (Section 9)
Holder in due course means any person who for
consideration becomes the possessor or of a
promissory note, bill of exchange or cheque if
payable to the bearer or to the payee or
endorsee thereof( if payable to order) before
the amount mentioned on it becomes payable
and without having sufficient cause to believe
that any defect existed in the title of the
person from whom he derived the title.

42. Qualifications of a Holder in Due
Course 1/2
In order to be a holder in due course a person will have to
prove the following-
1) He must be a Holder
That he is the holder of the instrument. In case the
instrument is payable to bearer then he is in
possession of the instrument and if the instrument is
payable to order then he is the payee or endorsee
thereof.
2) He must be a holder for valuable consideration
He must become the holder of the negotiable instrument
for a consideration in pursuance of a contract.

43. 2/2
3) He must become holder of negotiable instrument before its
maturity
If any person acquires any instrument after its maturity then he will
get the same title to the instrument as that of the transferor.
4) He must take the negotiable instrument complete and regular on
the face of it
It is the duty of every person who takes a negotiable instrument to
examine its form and contents thoroughly. If it contents any
material alteration which has not been confirmed by the drawer
through his signature or if it is incomplete say drawers name is not
there or it is not properly stamped he will not become a holder in
due course.

44. Special Privileges of a Holder in Due
Course 1/3
1) In case of an inchoate stamped instrument
If any person signs and stamps an inchoate
instrument and delivers the same to any other
person, then he can not hold against the holder
in due course that the instrument has not been
completed according to his instructions.
2) Liability of prior parties
All the prior parties to a negotiable instruments
continue to be liable to the holder of the
negotiable instrument until the instrument is
properly discharged.

45. 2/3
3) Fictious Bill
If any instrument is drawn by any person in the name of a
fictitious person and that person endorses the bill in favor
of any other person then he can not hold against the
holder in due course that the drawer of the instrument
was a fictitious person.
4) Conditional delivery
Where a bill or note delivered conditionally is negotiated
to a holder in due course the other parties to the
instrument can not escape liability on the ground that the
delivery of the instrument was conditional or for a special
purpose only.

46. 3/3
5) Instrument free from all defects
Once a NI passes through the hands of a holder
in due course, it becomes free from all defects.
6) Instrument obtained by unlawful means
The person liable on an instrument can not
plead against the holder in due course that the
instrument had been lost or was obtained by
means of an offence or fraud or for an unlawful
consideration.

47. Negotiation
According to Section 14 “When a promissory
note, bill of exchange or cheque is transferred
to any person, so as to constitute that person
the holder thereof, the instrument is said to
be negotiated.
There are 2 essentials of negotiations.
a) The instrument should be transferred from
one person to another.
b) The transfer should be in such a manner so
as to constitute the transferee of its holder.

48. Modes of Negotiation
• Negotiable instruments may be negotiated in
two ways:
By endorsement and delivery; or
By delivery only.

49. Endorsement(Section 15)
• Where the maker or holder of an
instrument signs the same, otherwise than
as such maker, for the purpose of
negotiation, on the back or face thereof or
on a slip of paper annexed thereto or so
signs for the same purpose a stamped
paper intended to be completed as a
negotiable instrument, he is said to
endorse the same and is called the
endorser

50. Kinds/Types of Endorsements 1/3
1. Blank or general endorsement
2. Full or special endorsement
3. Partial endorsement
4. Restrictive endorsement
5. Conditional or qualified endorsement

51. 2/3
1) Blank or General Endorsement- An endorsement is said to be
blank or general when the endorser merely signs on the back of
the instrument without specifying any person to whom the
payment is to be made.
Example- If A gives B a cheque of Rs.1000 payable to order and B
merely puts his signature on the back of the cheque and delivers it to C
such an endorsement is a blank endorsement.
2) Full or special Endorsement- When an endorser signs his name and
also specifies a person to whom or to whose order the amount of the
instrument is to be said the endorsement is said to be full or special,
and the person so specified is called the “endorsee” of the instrument.
3) Partial Endorsement- Where only part of the amount of the
instrument is transferred, it is called partial endorsement.
Example- A is the holder of an instrument for Rs.1000. He endorses the
instrument as pay to B or his order the Rs. 500. this endorsement is a
partial and invalid endorsement.

52. 3/3
4) Restrictive Endorsement- An endorsement is said
to be restrictive when endorser, by express words,
restricts the right of further negotiation of the
instrument.
5) Conditional or Qualified Endorsement- Where
an endorsement limits or negates the liability of the
endorser, it is called qualified endorsement. It differs
from a restrictive endorsement which restricts the
negotiability of the instrument but does not in any
way limit or negate the liability of the endorser.

53. Crossing of Cheque
• When two angular parallel lines are drawn on the
face of the cheque, the cheque is said to have
been crossed. These lines are usually drawn on
the upper left hand corner of the cheque.
• Sometimes some words are mentioned in
between these lines, otherwise they are left
blank.
• Crossing is a direction to the banker not to pay
the cheque across the counter but to pay to a
bank only or to a particular bank in an account
with the bank.

54. • Thus crossing provides a protection and
safeguard to the owner of the cheque as by
securing payment through a banker, it can
easily be detected in whose account the
money is received.
• The practice of crossing is confined to cheques
only and can not be extended to any other
instrument.

55. Specimen of crossed cheque

56. Types/Modes of Crossing
1) General Crossing
When two angular parallel lines are drawn on the face of the
cheque and the words and company or & Co. are written in
between them or even if they are left blank (with or without the
words “Not Negotiable”) then such a crossing is a general
crossing. It should be noted that in general crossing no name of
any bank is mentioned.

57. 2) Special Crossing
When in between two angular parallel lines on
the face of the cheque the name of any specific
bank is mentioned then it is known as a special
crossing. It is necessary to specify the name of a
bank in special crossing.

58. 3) Restrictive Crossing
In such a crossing the words ‘Account Payee
only’ or Payees Account only are added. The
addition of these words makes the cheque non-
transferable.

59. Who can cross a cheque
The drawer- while issuing a cheque the drawer can cross the cheque
generally or specially.
The holder- the holder can also cross the cheque in the following manner
• If the cheque is not crossed, he can cross the cheque generally or specially.
• If the cheque is crossed generally, he may cross it specially.
• If the cheque is crossed generally or specially, he may add the words “not
negotiable”.
The Banker – the banker can also cross the cheque in the following manner-
• If the cheque is not crossed and sent to the bank for collection banker can
cross the cheque generally.
• If the cheque is crossed generally and sent to the bank for collection bank
can cross the cheque specially.
• If the cheque is crossed specially the banker to whom it is crossed may
again cross it specially to another banker for collection.

60. Dishonor of Cheques
• The negotiable Instruments Act, 1881 makes
the dishonor of cheque a criminal offence.
• Section 138 of NI Act provides that “A cheque
is said to be dishonored when the payment is
not made on its presentment to the Bank.”

61. • According to Section 138 of NI Act 1881, “Where any
cheque drawn by a person on an account maintained by
him with a banker for payment of any amount of money
to another person from out of that account for the
discharge, in whole or in part, of any debt or other
liability, is returned by the bank unpaid, either because
of the amount of money standing to the credit of that
account is insufficient to honor the cheque or that it
exceeds the amount arranged to be paid from that
account by an agreement made with that bank, such
person shall be deemed to have committed an offence.”

62. Punishment
• be punished with imprisonment for [a term which may be
extended to two years], or with fine which may extend to
twice the amount of the cheque, or with both: Provided that
nothing contained in this section shall apply unless—
a) the cheque has been presented to the bank within a period
of six months from the date on which it is drawn or within
the period of its validity, whichever is earlier;
b) the payee or the holder in due course of the cheque, as the
case may be, makes a demand for the payment of the said
amount of money by giving a notice in writing, to the
drawer of the cheque, 20 [within thirty days] of the receipt
of information by him from the bank regarding the return
of the cheque as unpaid; and

63. • the drawer of such cheque fails to make the
payment of the said amount of money to the
payee or, as the case may be, to the holder in
due course of the cheque, within fifteen days
of the receipt of the said notice.