A Cheque is a bill of exchange made on a certain banker that doesn’t say it has to be paid back any other way than on demand. It also includes an electronic image of a truncated Cheque and an electronic Cheque.
Explanation I: The expressions used in this part are
(a) an electronic Cheque is one that is written on a computer and signed in a safe system using a digital signature (with or without a biometrics signature) and an asymmetric crypto system, or an electronic signature, as the case may be.
- b) A truncated cheque is one that is cut off during the clearing cycle, either by the clearing house or by the bank, whether they are paying or receiving money. This happens as soon as an electronic image is made for transmission, so the Cheque doesn’t have to be moved around physically anymore.
Explanation II: “Clearing house” in this part refers to either the clearing house run by the Reserve Bank of India or a clearing house recognized by the Reserve Bank of India as such.
For the purposes of this section, the terms “asymmetric crypto system,” “computer resource,” “digital signature,” “electronic form,” and “electronic signature” will all mean the same things as they do in the Information Technology Act, 2000 (21 of 2000).
| This is what “Cheque” meant in Section 6 of the Negotiable Instruments Act 1881:
A “cheque” is a bill of exchange made on a certain banker that doesn’t say when it needs to be paid.
The (NI) Negotiable Instruments (Amendment and Miscellaneous Provision) Act 2002 added “Cheques in Electronic Form” to this section, which went into effect on February 6, 2003.
The new part then said:
Section 6. “Cheque”: A “cheque” is a bill of exchange drawn on a certain account that doesn’t say it has to be paid in any other way than on demand. It can also be an electronic picture of a shortened Cheque or a Cheque in electronic form.
Section 1: For the purposes of this section, the phrases
“A Cheque in the electronic form” is a Cheque that looks exactly like a paper Cheque and is created, written, and signed in a secure system that meets the minimum safety standards using a digital signature (with or without biometrics signature) and an asymmetric crypto system. “A truncated cheque” is a Cheque that is cut off during the clearing cycle, either by the clearing house or by the bank (paying or receiving).
In this part, “clearing house” refers to either the clearing house run by the Reserve Bank of India or a clearing house that has been approved by the Reserve Bank of India as such.
“Cheque in Electronic Form” was one of the electronic papers that the ITA 2000 applied to, so the above change had something to do with it.
After more changes were made to the NI Act, “The Negotiable Instruments (Amendment) Act 2015” was passed on December 29, 2015, and went into effect on June 15, 2015.
As an example, this change changes what the term “Cheque in Electronic Form” means by changing the descriptions with the ones below:
Section 1: For the purposes of this section, the phrases
“A cheque in the electronic form” means a Cheque that is written on a computer and signed in a safe system using a digital signature (with or without fingerprints signature) and an asymmetric crypto system, or an electronic signature, as the case may be; b) “a truncated cheque” is a Cheque that is cut off during the clearing cycle, either by the clearing house or by the bank, whether they are paying or receiving payment. This happens as soon as an electronic image is made for transmission, so the Cheque doesn’t have to be moved around physically anymore.
In this part, “clearing house” refers to either the clearing house run by the Reserve Bank of India or a clearing house that has been approved by the Reserve Bank of India as such.
The terms “asymmetric crypto system,” “computer resource,” “digital signature,” “electronic form,” and “electronic signature” used in this section shall have the same meanings as given to them in the Information Technology Act, 2000.
The change makes sense and backs up what was already known when ITA 2000 was passed (it went into effect on October 17, 2000) and said that an electronic document and a digital signature were the same as a paper document and a written signature.
In the old method, you had to scan a Cheque to turn it into an electronic form and cancel the paper Cheque at the same time. In practice, it wasn’t useful, and it’s good that RBI saw its mistake and fixed the system.
A “cheque” in electronic form is now any document that is a firm order to a banker and has a digital signature on it.
However, Banks will need to add to their Account operating guidelines how to handle a non-standard style that meets the description given in Section 6 (2015 version).
On the other hand, it’s important to note that the change doesn’t affect how an electronic Cheque is “Present,” “Payment in Due Course,” or “Collecting Banker/Paying Banker Responsibilities.”
The NI Act now includes a definition of an electronic Cheque. Other parts of the Act have not been changed. Banks should be ready to receive an email from a customer containing a digitally signed electronic Cheque from another customer of the same bank or a different bank. The bank should then decide what to do.
At the moment, the clearing method only works with shortened Cheques, and there isn’t a clear way to clear new electronic Cheques. RBI needs to do something to set up a way for these kinds of Cheques to be cleared.
The NI Act hasn’t been changed to include new definitions of things like “endorsement in electronic form,” “holder in due course of an electronic cheque,” and other things. This means that some parts of the NI Act need to be read differently for electronic cheques.
We are now in an interesting time in the history of internet banking. The fact that the change isn’t broad enough will have some bad effects. It’s likely that a quick new amendment will be needed to clear up the problems that the 2015 amendment caused. |
