What do we mean by a Negotiable Instrument?
Section 13 of The Negotiable Instruments Act, 1881 lays down that a Negotiable Instrument refers to any promissory note, Bill of Exchange or Cheque. However, literally a Negotiable Instrument means ‘a written document which creates a right in favor of somebody and is freely transferable by delivery.’
How many kinds of Negotiable Instruments do we have?
A Negotiable Instrument as defined in The Act itself, talks about three kinds of Negotiable Instruments:- Promissory Note, Bill of Exchange and Cheque. These three are well defined in the Act itself. Cheque is however the most common way of transfer of money in the general parlance of business and day-to-day affairs.
OBJECT OF THE ACT:-
The main object of The Negotiable Instruments Act is to legalise the system by which instruments contemplated by it could pass from hand to hand by negotiation like any other goods. The purpose of the Act was to present an orderly and authoritative statement of leading rules of law that may govern the negotiable instruments and handling thereof.
PROCEDURE RELATING TO CHEQUES
The procedure has been prescribed to deal with the situation in which the most generally used negotiable instrument, i.e. a cheque is dishonored. The comprehensive reading of The Act and the ratio of law settled by various superior courts, shall make one aware of the fact that in general parlance all the factors that may lead to dishonor a cheque have been made punishable as per the provisions of Section 138 of The Negotiable Instruments Act. Section 138 of The Act is a code for itself, in so far as the cause of action, or the mode of presentation of the complaint is concerned. Further, the remnant portion of The Act effectively deals with the entire situations that may arise with respect to handling of the matters pertaining to the Negotiable Instrument.
Having been crafted way back in 1881. This Act is one of the most comprehensive legislation in so far as the commercial litigation with respect to payment and transfer of money by mode of Negotiable Instruments is concerned. The Act can be considered a handy work of the foresight of legislature, who had this entire aspect in mind way back in 1881 to have catered for the handling of the Negotiable Instruments.
To bring this act in consonance with the modern electronic mode of transfers in the present age era, The Payment of Settlement Systems Act, 2007 was introduced and section 25 of the said Act is virtually synchronous to the section 138 of The Act of 1881.
Section 138 of The Act provides that as soon as a cheque is dishonored, a Notice is to be served upon the Drawer of the cheque, within 30 days of the dishonor of the said cheque, calling upon the drawer to make the payment of the cheque within a period of 15 days or else to reply to the notice of demand. The furnishing of no response to the notice leads to drawing of adverse inference qua the accused. If the amount is not paid within 15 days of the service of the Notice then within next 30 days Complaint has to be filed by the Aggrieved Party.
If the drawer does not make payment within 15 days of the service of the notice then the aggrieved party is supposed to file a complaint within 30 days of the expiry of 15 days service of notice upon the accused, alongwith the original cheque and the original documents required for just adjudication of the case. The court after appreciating the material on record thereafter, issues summons to the accused.
The accused has to seek bail and then he is served upon with the notice of accusation and then the accused enters into his defense and then files Statement of Defense. The evidence that is to be led, is to be led by way of affidavit.
Being a special enactment, unlike other criminal proceedings, the onus of proof in these proceedings does not lie on the person setting the law in motion. There is a presumption that runs in favor of the bearer of the cheque and the said presumption, although rebuttable, the onus of rebuttal always rests on the accused.
Punishment
The defaulting party may be sentenced with imprisonment for a period of maximum 2 years imprisonment or with fine, which may extend to twice the amount of cheque or with both.
IMPORTANT AMENDMENTS:
The Act had undergone amendments in 2016 where the most important amendment determining the territorial Jurisdiction where the complaint regarding the dishonour of the cheque needs be filed. A newly added Section determines the territorial jurisdiction of the complaint to be filed, which is the place where the cheque is presented for encashment.
With a view to add more teeth to The Act, recently yet another Section has been added to the Act, which has come up as a relief for the creditor. The provision of interim compensation has been provided, which is to be paid to the complainant by the accused at the time of the accused being served with the notice of accusation. The accused is supposed to pay the same to the complainant within sixty days from the date of the order or within such further period as may be directed by the court.
The amendment to The Act, has brought in the insertion of another provision, which empowers the appellate court to impose appropriate compensation before admitting the appeal preferred by the convict.