Facts of the Case
- A sells a radio to M, who is a minor.
- M makes payment by issuing a cheque to A.
- A endorses the cheque to B.
- B takes the cheque in good faith and for consideration.
- The cheque is dishonoured when presented for payment.
Issues in the Case
- Can a minor be held liable on a negotiable instrument such as a cheque?
- Does A have any liability as an endorser to B upon dishonour of the cheque?
- Can B enforce payment of the cheque from A or M?
Principles Associated With It
- Under Section 26 of the Negotiable Instruments Act, a minor may draw, endorse, deliver, and negotiate a negotiable instrument, but cannot be bound by it.
- Minors do not have contractual capacity under the Indian Contract Act, 1872; thus, any contract with a minor is void ab initio.
- An endorser of a cheque can be held liable to subsequent holders in case of dishonour, provided the instrument was endorsed for consideration and in good faith.
- Section 30 of the Negotiable Instruments Act provides that the drawer or endorser of a dishonoured cheque is liable to compensate the holder for any loss or damage.
Judgement
- M, being a minor, cannot be held liable on the cheque as per the Negotiable Instruments Act and Contract Act.
- A, as the endorser of the cheque, can be held liable by B, since B took the cheque in good faith and for value.
- Therefore, B cannot recover the amount from M, but can enforce payment against A as the endorser.