THE NEGOTIABLE INSTRUMENTS (AMENDED) ACT 2015

The government has released the Negotiable Instruments (Amendment) Bill, 2015 to make it clearer where cases of check fraud can be filed. This bill was passed by parliament during its most recent winter session. As of June 15, 2015, the Negotiable Instruments (Amendment) Ordinance, 2015 was made public, which made more changes to the Negotiable Instruments Act, 1881. This means that the provisions of the Negotiable Instruments (Amendment) Act, 2015 are considered to have gone into effect. By making changes to the Negotiable Instruments Act of 1881, the changes make it clearer where to file a case for a crime under Section 138 of the Act. The change says that a court where the payee’s bank branch is based will be the one where a case of check dishonor can be filed.

• It was brought up in the Lok Sabha on May 6, 2015, as the Negotiable Instruments (Amendment) Bill, 2015. It is the goal of the Bill to change the Negotiable Instruments Act, 1881.  The Act describes promissory notes, bills of exchange, and checks. It also sets punishments for things like checks that don’t clear.
• The Act spells out the situations in which you can make a complaint about a bad check. However, the Act doesn’t say which courts have authority over the area where such a case should be made.  Cheque bounce cases can only be brought in a court that has authority over the bank office of the payee (the person who gets the check). This is what the Bill changes in the Act.
• If someone has already made a complaint against someone who writes checks in the right court, then all future complaints against that person will be sent to the same court, no matter what jurisdiction area applies.
• If the same person is charged with more than one crime in more than one court, the case will be sent to the court that has the right to hear it.
• The Bills also change what it means to have a “cheque in electronic form.” It was described by the Act as a check that looks exactly like a paper check and was made in a safe system using a digital signature.  There was a change to the meaning to include an electronic check that was written on any machine and signed in a safe system with a digital signature.

For example:

CHEQUES

Cheques are some of the most important and common forms of negotiable instruments. The Negotiable Instruments Act, 1881 defines and regulates cheques. Almost all large business transactions these days make use of cheques instead of cash. Apart from drawers and drawees, parties to a cheque include payees, holders, endorsers, and endorsees.

Meaning of a Cheque

Section 6 of the Negotiable Instruments Act defines what a ‘cheque’ means. According to this provision, a cheque is basically a bill of exchange drawn on a specific banker. Furthermore, it is not payable otherwise than on demand. The Negotiable Instruments (Amendment) Act had amended this definition to make it broader in 2015. Accordingly, cheques now include the electronic image of a truncated cheque and also an electronic cheque. Despite this amendment, the basic definition still remains the same. A truncated cheque is one which undergoes truncation during a clearing cycle.

Truncation

Truncation basically means the conversion of a physical cheque into digital format. Either a clearing-house or a bank may do this upon generating an electronic image of a cheque. An electronic cheque is a cheque which exists in digital format. A computer resource generates such cheques using digital signatures (either with or without biometrics). Looking at the definition of a cheque, we can conclude that it is similar to a bill of exchange. Furthermore, it is always drawn on a banker and is payable on demand.

 Parties to a Cheque

Generally, there are two parties to a cheque. These include the drawer and the drawee. While the drawer is the person who draws the cheque, the drawee is the banker on whom it is drawn. Apart from these, there can also be a payee who is liable to pay the amount on the cheque. Furthermore, there can also be a holder who is generally the original payee. When the holder endorses the cheque to somebody, he becomes the endorsee. On the contrary, an endorsee is a person to whom the cheque is endorsed.

Essentials of a Cheque

The main elements of cheques are that they are drawn on a banker and are payable on demand. Furthermore, they never require any formal acceptance. Cheques can be payable either to the drawer himself or to a bearer on demand. Hence, there might be two or more parties to a cheque depending on the situation. Another feature of cheques is that they are usually valid only for six months. They do not require any stamping as other negotiable instruments do.

Cheques v/s Bills of Exchange 

Cheques and bills of exchange might appear to be similar but there are important differences between them. The following are some such points of distinction:

A cheque is always drawn only on a banker, while a bill may be drawn on any person.

Cheques are payable only on demand, while bills may be payable on demand or upon a specific date.

It is important to cross a cheque but a bill needs no such crossing.

Bills generally carry a grace period of three days for repayment of money.

Cheques, however, do not provide for any grace period.

Dishonour of a bill requires the production of a notice. No such notice is important for cheques.

All cheques are bills of exchange but the vice versa is not true.