INTRODUCTION:
The negotiable Instrument Act was introduced in the year 1881 and aimed at providing easement to the growth of banking and commercial transactions. It legalizes the system of the negotiable instrument. The process of transferring monetary value from one person to another by way of legal documents is a negotiable instrument. In the legal sense, it means transferring something title based from one person to another. It plays an important role in financial transactions and is a signed written document. Such documents shall be aimed at making the financial transaction in favor of one another. For instance, a cheque signed by one person in favor of another person bears a certain amount for a future date. The person promising the amount of money is the drawer of funds. The person in whose favor it is drawee of funds.
OBJECTIVES OF NEGOTIABLE INSTRUMENTS:
- It provides for the system of operation that is responsible for the regulation of negotiable instruments.
- It provides a better explanation of matters related to negotiable instruments.
- It provides for the rights and liabilities of creditors as well as debtors.
- It provides a mechanism for the resolution of the dispute.
DISTINCT FEATURES OF NEGOTIABLE INSTRUMENTS:
- Moveable: It is moveable in nature and an easy method of transferring money.
- Written: It is a written document signed by the drawer of funds.
- Signature: It acts as an authentication of valid consent between parties for paying a certain amount by one person to other.
- Monetary Value: It shall be in terms of money that is recognized by India.
- Date & Time: The period in which the transaction shall be made should be certain.
- Specific Person: The amount transferred shall be made in name of a specific person called ‘payee’.
- Demand: This is a direct transfer from one person’s account to another in bank accounts.
TYPES OF NEGOTIABLE INSTRUMENTS:
Promissory Notes: Such transaction shall take place between debtor and creditor.
Bills of Exchange: Such transaction shall take place between the creditor and debtor.
Cheque: Such transaction is an example of a bill of exchange where the creditor directs the bank to pay a certain amount to the ‘payee’.
CERTAIN PROVISIONS OF NEGOTIABLE INSTRUMENTS:
Section 138: It provides for settlement between parties without the involvement of the court. It provides for settlement only when both parties agree to it.
Section 139: It provides for the presumption that the cheque was in favor of the holder as referred above.
Section 140: Provides there shall be no reason to believe when the cheque was issued and presenting of same shall be dishonored.
Section 141: It provides if the cheque was issued in name of the company. Then the in charge of the company at the time of issuing such cheque shall be held responsible for the same. It must be proved that the said act was done with his knowledge. Merely based on the statement of someone being in charge of the company without any proof cannot satisfy requirements under Section 141. It was observed by the court that merely being at the high designation of the company cannot be the reason for liability. The involvement of said person and the role played by him/ her in the affairs of the company determines liability.
Section 142: It provides for guidelines to be exercised in case of compounding offenses. Guidelines given by Supreme Court are as followed—
- The accused may make an application for compounding of offense at the first or second hearing. The court shall not impose any cost on the accused for the same.
- If the application for compounding is made before the magistrate the accused shall deposit 10%. Such cheque amount shall be deposited with National Legal Service Authority or any other authority as provided by court.
- If an application for compounding is made before Sessions Court and High Court in a way of revision or appeal. It may be allowed with conditions that the accused shall pay 15% by way of costs.
- If an application for compounding is made before the Hon’ble Supreme Court, then the accused shall pay 20% of the cheque amount.
Such guidelines are not obligatory in nature and merely indicative.
Section 143 provides for settlement between parties for a certain amount of money in return for not prosecuting the accused. Such settlement can take place if the complainant agrees to the same and if not, the court may proceed with the case.
LANDMARK JUDGEMENTS:
M/S Dalmia Cement (Bharat) Ltd. v. M/S Galaxy Traders & Agencies Ltd. & others
When the complainant received a notice form the complainant to make payments by that time given time period has already expired. It happens again with a second notice resultantly the accused failing to make payments and hence proceedings. The court in its view of protecting the objectives of the act allowed the proceedings as provided by the act.
Canara Bank v. Canara Sales Corporation
The relationship between its banker and its consumers is tied to duties and no party shall be involved in fraud. In the instant case, the respondent has an account in the bank, and cheques were encashed without the initials of the Managing Director. That was a mistake on part of both the Creditor and Debtor but negligence on part of the bank weighed more. Thereby resulting in the dismissal of the appeal.
M/S Meters and Instruments Pvt. Ltd. & Anr. v. Kanchan Mehta
When legal notices were issued the company did not compensate and was later willing to settlement and refused by the complainant. The application was dismissed by High Court because the complainant does not provide consent. However, Supreme Court said that the offenses are civil in nature, with the 2002 amendment consent of both parties not essential. The company was willing to compensate the complainant, the court provides the amount that was necessary to be provided.
CONCLUSION:
A negotiable Instrument is an easy medium of transferring monetary value from one person to another. Such transactions are done in written documents and signed by the rawer and drawee of the mount. The breach of the scheme could be challenged in a court of law. Indian Parliaments amend the law with present-day scenarios However, some provisions of the act have lost their effect. In Indian Courts, there are countless cases pending. Still, parties fail to reach a settlement by way of mediation or Lok Adalat. There are alternative provisions for dealing with such cases but people chose litigation. Some cases may reach a settlement while others not. Parties should be willing to reach a reasonable settlement for it being effective.
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