tonmoy (advocate) 05 January 2018

Negotiable instruments act, 1881

Please advise me on this, in our company we give products to distributors on credit by taking a undated cheque as a security. In the cheque the distributor only mentions the name of the company and signature. And when the distributor defaults in making the payment, we incorporate the amount and date and get it dishonored from the bank and issue a notice U/S 138 of NI Act. Even after recieving the notice the distributor is reluctant to make the payment then we initiate a case u/s 138 of the NI Act. My query over here is, is this legally allowed to initiate a case like this. can anyone help me with any rulings or section under NI Act where it is mentioned it is allowed.

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Rama chary Rachakonda (Secunderabad/Telangana state Highcourt practice watsapp no.9989324294 ) 05 January 2018

On receipt of a legal notice or summons, the defaulter can settle the payment amicably out of the court at any time or proceed with a lawyer for hearing, at the court where the complaint has been registered.

chesser resources 11 June 2026

When dealing with undated cheques or security cheques under Section 138 of the NI Act, the legal position hinges on whether there is a legally enforceable debt at the time of presentation. While Section 20 of the Act grants a prima facie authority to complete an inchoate instrument, the burden of proof shifts significantly under Sections 118 and 139. For a clear breakdown of how courts view the completion of inchoate instruments and security cheques, these Negotiable Instruments Act 1881 notes (https://chesserresources.com/doc/negotiable-instruments-act-1881/) map out the critical sections and relevant case law presumptions. It's really helpful for understanding how the legal liability is constructed in such disputes.