138 negotiable instruments act

sanjay haritwal (Querist) 15 May 2015 This query is : Resolved
Would like everyone's view on one Q on cheque held as security or deposited in advance towards installments.........

In case of the loan agreement having Arbitration clause, Can Cheque be deposited before the arbitration is invoked ??? OR can the cheque be only deposited after the Arbitration is invoked Or decided ???

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Dr J C Vashista (Expert) 16 May 2015
1. Depositing of cheque is a different issue to an arbitration clause in loan agreement.
2. It is to be seen from the agreement that at what stage the "security" cheque should be presented for encashment, however, if dishonoured, it would not attract the provisions of section 138 of the NI Act, 1881.