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2. (a) SECTION 138 OF THE NEGOTIABLE INSTRUMENTS ACT 1881

2.1

In India, there is reason to believe that instruments of exchange were

in use from early times and we find that papers representing money were introduced into the country by one of the Muhammadan sovereigns of Delhi in the early part of the fourteenth century, the idea having been borrowed from China; and it is the accepted theory of the western savants, that in China a complete system of paper-currency and banking had been developed as early as the tenth century and it is not improbable that such an idea

filtered into India sometime later.10

2.2

Before the passing of the Act, the law of negotiable instruments as

prevalent in England was applied by the courts in India when any question

relating to such instruments arose between Europeans.11

2.3

Though the Negotiable Instruments Act had been passed into law in

1881, Chapter XVII comprising sections 138 to 142 was inserted by the

Banking, Public Financial Institutions (Amendment) Act, 1988 (66 of 1988).

and

Negotiable

Instruments

Laws

2.4

The value of a cheque, which was reduced to merely a piece of paper,

particularly amongst the business community, has been greatly enhanced since the introduction of this new Chapter XVII relating to penalties in case of dishonour of certain cheques for insufficiency of funds in the accounts. The implementation of these provisions for nearly 14 years revealed certain

10

Supra note 1, p. 5.

11

Ibid.

12

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