Negotiable Instruments (NI) law

Definition of Negotiable Instruments (NI)-

A negotiable instrument is a signed paper that promises a sum of payment to a defined person or the appointee. In other words, it is a formalized type of IOU: A transferable, signed document that agrees to pay the bearer a sum of money at a future date or on-demand. The payee, who is the person getting the payment, necessity be named or otherwise indicated on the instrument.

Because they are movable and assignable, some negotiable instruments may trade on a secondary business.

Common Types of Negotiable Instruments are:

5. Promissory notes.
5. Bill of exchange.
5. Check.
5. Government promissory notes.
5. Delivery orders.
5. Customs Receipts.

Promissory notes-

Section 4 of the Negotiable Instruments Act specifies promissory notes. The definition states promissory notes are instruments in writing and they are, however, neither bank notes nor currency notes which also include this feature. The maker of these notes allows paying a certain sum either to a particular person or their bearers. This maker undertakes his responsibility to pay by attaching his signature on the records.

Bill of exchange-

Section 5 of the Negotiable Instruments Act, 1881 describes bills of exchange. According to this explanation, a bill of exchange is an instrument in writing including an absolute order. Furthermore, the bill’s maker directs a particular person to pay some money either to a specific person or its bearer.

This definition is similar to that of promissory notes but there are some variations between them. Hence, the primary elements, parties, and rules governing these two negotiable instruments are different.

Parties to Bills of Exchange

1. Drawer
2.  Drawee
3. Acceptor
4. Payee
5. Holder

Check-

Section 6 of the Negotiable Instruments Act explains what a ‘cheque’ means. According to this provision, a cheque is a bill of exchange drawn on a particular banker. Moreover, it is not payable contrarily than on-demand.

The Negotiable Instruments (Amendment) Act had amended this description to make it more obvious in 2015. Accordingly, cheques now enter the automatic image of a truncated cheque and also an electronic cheque. Notwithstanding this amendment, the basic meaning remains the same.

The essential characteristics of a cheque are mentioned as follows:

• Cheque must be in writing
• Cheque has to be an unconditional order
• The Cheque must explicitly specify the Bank
• The payment that has to be made must be directed to an identified person/ organisation
• Cheque must be payable on demand
• Cheque must be for a specific sum of money
• Cheque must bear clear signatures of the drawer

The drawee must present cases of the default by the drawer.

The following are the main topics to remember:

• The first thing is to state that the cheque was given in the bank in the specified time- period
• It must give the statement of debt as well as drawer’s legal responsibility
• The notice must give the notice given by the bank on the dishonour of cheque. A copy of the said cheque could also be included.

Explicit order for payments of dues with interest is responsible to be paid within 15 days of getting the notice.

Case Filing Procedure of Cheque Bounce-

Draft a complaint?

A complaint is only affected when the drawer has not responded to the charge notice within 15 days from the dispatch of the notice or has been holding payment casually or has out rightly denied to pay the amount. A complaint is to be filed in the court which would have the jurisdiction over the conflict within the directed time limit of 30 days (from the date of acceptance of the demand notice by the drawer).

It is relevant to know which court the drawee should approach in a cheque bounce case. The drawee can register the complaint in a court within whose local limits of jurisdiction any of the latter incidents may have arisen:

• Place where the cheque was drawn
• Place where the cheque was presented
• Place where bank returned the cheque
• Place where the notice of demand of payment was accepted by the drawee

The drawee must have all the important documents before filing the complaint, for instance,

• Photocopies of the cheque returned by the bank, memo, copy of the legal notice for demand sent to the drawer and the acknowledgment slips/ receipts
• Written complaint
• Letter of oath

Structure of payment of court process fees to file a cheque bounce case?

Every lawsuit process demands payment of court fees. Likewise, while filing a cheque bounce objection, the drawee (complainant) has to pay a standard amount of court fees which differs from case to case and entirely depends on the cheque amount against which the complaint is being filed court.

The standard court fee structure varies for different cheque amounts which are mentioned below:

Cheque Amount Court Fee

• Rs. 0 to 50,000/- Rs. 200/-
• Rs. 50,000/- to 2,00,000/- Rs. 500/-
• Above Rs. 2,00,000/- Rs. 1000/-

When is court notice sent to the accused?

Once the complaint is filed by the drawee (complainant), the court issues summons to the drawer (accused person) who has failed to make payment and gave an occasional cheque.

Relevant evidence in a cheque bounce case?

It is desirable to make the cheque bounce complaint with the help/ support of an expert cheque bounce lawyer of thelegalbank. The complaint must forward all the relevant/ helpful evidence like the first cheque that was returned by the bank, the cheque return memo, demand notice sent against non-payment/ cheque bounce, acceptance of legal notice and any other relevant document that can be used as evidence to support one’s legal position that the accused is responsible to pay the unpaid amount with interest as deemed fit by the court for all the mental and physical trauma caused due to court procedure.

The penalty and punishment for an accused in a cheque bounce case?

Once the complete trial is over and if the accused is got wrong, then he can be punished with a financial penalty which can be double the cheque amount or be punished with imprisonment which may extend to 2 years or even both.

Vakalatnama and how is it essential during a court procedure?

The Vakalatnama must be presented on the first date of hearing/ filing of the complaint with the signatures of the complainant who is the client of the advocate.

• As soon as the case is filed and held in the court, every document is cross- checked by the Judicial Magistrate First Class, as a result, all the real documents like the original cheque (that was retuned back by the bank), original memo, a copy of the legal report, receipts from the post office, receipts of Universal Product Code (UPC), acknowledgement receipts, are all needed during the time of cross- checking the documents.
• Besides the documents, the limitation period to file the suit is also confirmed.
• Moreover, the Method Form which is popularly known as the Bhatta, is filed by the drawee (complainant) himself or by his lawyer, along with the address of drawer (accused)
• The next step is for the court to issue summons to the accused for him to appear in the court on a particularized date to be decided by the court.
• In case the accused fails to appear in the court on the wanted date of hearing, the court has complete authority to issue a bailable warrant against him if requested by the complainant.
• And in case the accused again fails to appear before the court, the court in all likelihood will issue a non- bailable warrant of arrest against him.

Civil or Criminal action toward the drawer (accused) –

 A dishonoured cheque in all possibility can result in both a civil as well as a criminal prosecution against the drawer if the drawee (complainant) does not get the payment that was initially agreed.

An aggrieved drawee (potential complainant) who has been on the getting end of a cheque bounce has 2 options available to him for lawsuits. First, to file a lawsuit under Section- 138 (cheque bounce) of the Negotiable Instruments Act, 1881 or second, a lawsuit under Section- 420 (cheating and dishonesty) of the Indian Penal Code, 1860.

Now, in case a lawsuit against the drawer is ground for cheating under Section- 420 of the IPC, the court can issue a non- bailable warrant against the drawer of the cheque. Although to institute a lawsuit under this section, a case of cheating and dishonesty needs to be verified against the drawer.

In conditions of multiple bouncing of cheques, the law allows filing separate cases for separate cheques bounced.

• Additional risks due to cheque bouncing – In line with the RBI rulings, the banks have been authorised to refuse the issuance of checkbooks to any of their customers who have been accused at least 4 times against dishonour of cheque for an amount exceeding Rs. 1 crore.

Cheque bounce suit filing process in short:-

Following a lapse of 15 days from the date of delivery of the demand letter, if no payment has been accepted, there is a 30 day period to file the objection before a magistrate upon the payer.

Court Process for filing a case-

1. The court issues an amount as fee depending on the amount declared on the cheque.

2. Memo (Vakalatnama) of Advocate on with signatures of the complainant is required at the time of filing a case.

3. All records are cross-checked by the Judicial Magistrate First Class after the case is filed by the complainant in court. For this procedure, original cheque (bounced), a copy of the notice, original memo, receipt of the post office, acknowledgment receipt, and receipt of the U.P.C. are required.

4. The period of limitation is also confirmed at this stage.

5. The Process Form, known as the Bhatta, is filed by the complainant or lawyer, along with the address of the accused.

6. The court then proceeds a summon to the accused to appear in court on a particular date.

7. If the accused does not present in court on the date of hearing, the court issues a bailable warrant on the application of the complainant.

8. If the accused still violate the court and does not appear for the hearing, the court may issue a non-bailable warrant of arrest.

Some other points to keep in mind are as follows

• A cheque issued as a gift/contribution/any other duty, cannot be covered under Section 138 of the Act. For this section to apply, the cheque has to carry a legal responsibility.
• A cheque expires after 3 months.
• The exhibition of the cheque at the request of the drawer after the demand notice has been sent will not mean that the drawer’s time limit under the notice has grown.
• A stay in filing the complaint after the lapse of 30 days may be released by the magistrate only in extraordinary situations.

Related Sections-

• Section 4
• Section 5
• Section 6
• Section- 138
• Section- 420 of IPC

For Related Action= “Thelegalbank” Jaipur, Rajasthan, India, 302021