The Covid-19 has affected every sphere of the life of everyone. All sorts of activities are being suspended including the credit-based commercial transactions. The Negotiable Instrument Act, 1881 (NI Act) provides for rules and regulations for one of the widely used payment instrument, i.e the cheque.
Section 6 of the NI Act, defines cheque as a cheque is a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand and it includes the electronic image of a truncated cheque and a cheque in the electronic form. Chapter XVII of the Act illustrates the penalties in case of dishonour of cheques due to insufficiency of funds in the account of the drawer of the cheque.
As per the provision of Section 138, states that the dishonour of cheque is a punishable offence with the imprisonment of two years and fine. It also provides that the validity of the cheque is for 3 months from the date of issuance of the cheque. In other words, within three months from the date of issuance of the cheque, the payee needs to submit the cheque in the drawer’s bank. Also, on the other hand, the issuer of the cheque is expected to maintain a sufficient balance in his account.
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Now, keeping in mind the present situation of the country, during this lockdown when people are not supposed to move out, the payee cannot submit the cheque to the drawee well within the validity period. Moreover, maintaining the sufficient balance for the period of the validity of cheque issued by drawer stand at a peril.
The Reserve Bank of India, with its notification dated 27.03.2020 has given all term-loan debtors the option of a postponement on loan repayments for 90 days for the instalments due in March, April, and May, with the assurance that it will not affect their respective credit scores. This is applicable to commercial banks, regional rural banks, primary (urban) co-operative banks/state co-operative banks/district central co-operative banks, financial institutions and non-banking financial companies (NBFCs). But the NI Act does not provide any relief with the dishonour of cheques meaning that lenders are still free to invoke proceedings under Section 138 for credit transactions. Numerous creditors/payees that have been unable to present their cheques for clearance stand to forgo their rightful entitlement(s).
The lockdown has restricted the logistical ability of payees and they cannot give the clearance. Therefore, they are all constrained to depend upon the goodwill of the drawer who may or may not re-issue a cheque.
But if we have to take an example of extending the validity of the cheque by three months more then it will not be fair on the part of the issuer of the cheque, since, he was legally bound to honour the cheques only for a period of 3 months from the date of issue. Therefore, taking care of one problem might lead to another. Hence, the Government needs to balance the probabilities to avoid class-specific legislation which would lead to unfairness or arbitrariness on the touchstone of Article 14 of the Constitution.
Since there is no well-established defence of force majeure, the drawers are vulnerable to potential criminal and civil proceedings for an external event that could not have been reasonably foreseen.
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Any notification or ordinance should address the issue from the perspectives of both the drawer and the payee. If the government only focuses on one party, it will be creating undue hardship on the other party, and would invariably lead to litigation and create a burden on the courts.