23 May 2026 06:34 AM

Dishonour of Cheque--Friendly Loan--Not Legally Enforceable Debt If There Is No Consideration To Form Contract

A "friendly transaction" does not constitute a legally enforceable debt or liability under Section 138 of the Negotiable Instruments Act. Friendship alone cannot form valid consideration for a contract. In the absence of a legally enforceable debt or liability, the statutory presumption in favour of the cheque holder under the NI Act does not arise, and Section 138 has no application. A transaction must have the character of a commercial or contractual obligation to attract the provisions of Section 138 NI Act.

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