Friday, November 19, 2010

Object of Section 138 of Negotiable Instrument Act

The Supreme Court of India in Dalmia Cement (Bharat) Ltd Vs. Galaxy Traders & Agencies Ltd & Ors. [(2001) 6 Supreme Court Cases 463] in paragraph 3 referred the object of section 138 of NI Act.

Dalmia Cement (Bharat) Ltd Vs. Galaxy Traders & Agencies Ltd & Ors. [(2001) 6 Supreme Court Cases 463], the Apex court has referred to the object of section 138. Paragraph 3 of the said decision reads thus:

"3. The Act was enacted and section 138 thereof incorporated with a specified object of making a special provision by incorporating a strict liability so far as the cheque, a negotiable instrument, is concerned. The law relating to negotiable instruments is the law of commercial world legislated to facilitate the activities in trade and commerce making provision of giving sanctity to the instruments of credit which could be deemed to be convertible into money and easily passable from one person to another. In the absence of such instruments, including a cheque, the trade and commerce activities, in the present day world, are likely to be adversely affected as it is impracticable for the trading community to carry on with it the bulk of the currency in force. The negotiable instruments are in fact the instruments of credit being convertible on account of legality of being negotiated and are easily passable from one hand to another. To achieve the objectives of the Act, the legislature has, in its wisdom, thought it proper to make such provisions in the Act for conferring such privileges to the mercantile instruments contemplated under it and provide special penalties and procedure in case the obligations under the instruments are not discharged. The laws relating to the Act are, therefore, required to be interpreted in the light of the objects intended to be achieved by it despite there being deviations from the general law and the procedure provided for the redressal of the grievances to the litigants. Efforts to defeat the objectives of law by resorting to innovative measures and methods are to be discouraged, lest it may affect the commercial and mercantile activities in a smooth and healthy manner, ultimately affecting the economy of the country."

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