DIFFERENCE BETWEEN SEC. 138 AND SECTION 142 OF NEGOTIABLE INSTRUMENTS ACT, 1881: HEMANGINI SHEKHAWAT

                             

Difference between Sec.138 and Sec. 142 of Negotiable Instruments Act,1881 along with recent amendments

  Author: Hemangini Shekhawat

Manipal University.      

ISSN: 2582-3655  

ABSTRACT

Firstly the Negotiable Instrument Act has been explained. The introductory part of Negotiable Instrument includes History and Subject Matter of Act. Next explained is Section 138 and Section 142. Consequently, the difference has been explained between both the sections. At last, paper has been concluded with a Conclusion.

INTRODUCTION

The history of the present Act is a long one. The Act was originally drafted in 1866 by the 3rd India Law Commission and introduced in December 1867 in the Council and it was referred to a Select Committee. Objections were raised by the mercantile community to the numerous deviations from the English Law which it contained. The Bill had to be redrafted in 1877. After the lapse of a sufficient period for criticism by the Local Governments, the High Courts and the chambers of commerce, the Bill was revised by a Select Committee. In spite of this Bill could not reach the final stage. In 1880 by the Order of the Secretary of State, the Bill had to be referred to a new Law Commission. On the recommendation of the new Law Commission, the Bill was re-drafted and again it was sent to a Select Committee which adopted most of the additions recommended by the new Law Commission. The draft thus prepared for the fourth time was introduced in the Council and was passed into law in 1881 being the Negotiable Instruments Act, 1881 (Act No.26 of 1881)

The most important class of Credit Instruments that evolved in India was termed Hundi. Their use was most widespread in the twelfth century and has continued till today. In a sense, they represent the oldest surviving form of credit instrument. These were used in trade and credit transactions; they were used as remittance instruments for the purpose of transfer of funds from one place to another. In the Modern era, Hundi served as. Travelers Cheques.

According to Section 13 of the Negotiable Instruments Act, “A negotiable instrument means a promissory note, bill of exchange or cheque payable either to order or to bearer.‘ But in Section 1, it is also described that Local extent, Saving of usage relating to hundis, etc.,

Commencement. -It extends to the whole of India but nothing herein contained affects the Indian Paper Currency Act, 1871, Section 2, or affects any local usage relating to any instrument in an oriental language. Provided that such usages may be excluded by any words in the body of the instrument, which indicate and intention that the legal relations of the parties thereto shall be governed by this Act; and it shall come

Main Types of Negotiable Instruments are:

  1. Inland Instruments
  2. Foreign Instruments
  3. Bank Draft

Offence under Sec.138 of Negotiable Instrument Act is as follows-:

  • Drawing of cheque
  • Presentation of cheque to the bank
  • Returning the cheque unpaid by the drawer bank
  • Giving notice in writing to the drawer to cheque
  • Failure of the drawer to make payment

  Sec.142 of Negotiable Instrument Act says that

  • Holder of the cheque has to deposit in the complaint in writing, then the only court will take cognizance of any offence committed by accused
  • Complainant has to submit the complaint within one month of date(Court can take the complaint after said period if the court is satisfied with the cause in delay)
  • Manager can represent the company and can even lodge a complaint
  • Filing of complaint would arise after completion of 15 days from the date. Drawer receives the notice and fails to pay the amount
  • As long as a period of the above notice does not expire, drawee cannot make the drawer criminally liable.
  • DM does not have to specifically state that he is taking cognizance of offence. If he takes steps under Sec. 200 of Cr.Pc, he has said to take cognizance of offence.
  • Once a cause of action has arisen, the limitation will begin and a new cheque cannot be presented thereafter.

DIFFERENCE BETWEEN SEC 142&138

Section 138 talks about on which grounds can court take cognizance of offence. It talks about 6 conditions on which the payer can hold the drawer criminally liable. But on the other hand, Sec. 142 talks about the manner in which court would accept cognizance of offence. It talks about the manner in which complaint is to be registered and time limitations for the payer to hold drawer criminally liable. In short Sec.138 talks the grounds and Sec.142 talks the manner of application of those grounds.

HISTORY

Common Wealth nations have codified the laws relating to Negotiable Instruments.

United States of America

US follows Sec 3 of UCC.UCC says Negotiable Instrument is an instrument ordering payments on a certain fixed time and date. Draft, Notes are instruments used in finanicial transactions and are taken as the working engine of any business, economy. According to Article 4A and 8 of  UCC, Negotiable Instrument doesn’t include money and securities and only involves cheques and notes. The conflict between Sec 4,9 and Sec 3, then Sec 4&9 will override.

In late 94, if the US would have ratified the United Nations Conventions of International Bills of Exchange & International Promissory Notes would have forestall Article 3. But the US did not give formal consent for the same.

ROME

Rome marked its history by use of Prescriptions as a Promissory Note. It embarks its history in Rome as being the first note used in financial transactions 2,000 years back.

CHINA

China had an Imperial Dynasty Rule during the time of introduction of Negotiable Instrument.5 clans and 10 empires followed this famous imperial dynasty. Feitsyan was the first instrument used in China in 8 Century.

PERSIA

Persia had a form of paper that was used as Note and its validity was up to 3 years. Used among court and traders/merchants.

INDIA

Chanakya/Mauryan period transactions were ruled by “Adehsa”.Adesha is to ask a person to pay money on being a representative of the sender. Banks’ roles were performed by Merchant Artisian. Merchant Artisian is a group of persons controlling trade in a particular area. Trade of offerings/money was done by traders group.

MODERN PERIOD

  • LORD MANSFIELD

He was a British Barrister born 1705 was Lord Chief Justice of King Bench in 1783 & other reputed offices. A notable jurist of his time gave judgments in Carter V Boehm and Pillan V Van.

  • GERMANIC LOMBARDS

These were German Nomads who governed the Italian Peninsula.

DIFFERENCE BETWEEN NEGOTIABLE INSTRUMENT AND OTHER CONTRACTS

Negotiable Instruments desires to even part performance of the contract but is different from another contract. A contract only allows the full performance of contemplation. On one hand, where Contract is an ocean allowing full carrying out of contemplation, Negotiable Instrument is a river part of the ocean allowing only part carrying out of a thing. The contract allows to work out the carrying out of rights of a holder. The instrument implements

1.Capacity to request remittance of money.

2. The right of remittance can be shifted in a case for eg. Bearer Instrument.

AMENDMENTS

The amendment is done by Lok Sabha in regards to cut less the bonce of cheques. There have been two amendments introduced in the year 2018 on 2 Aug.

They are Section 143A&section 148.

Section 143A says the court can order drawer to pay interim relief to drawee up to 20% during proceedings of being” non-guilty”.On acquittal, court shall order drawee to remit the amount within 30 days as long with interest as ruled by RBI. This amendment is introduced to protect the payee’s rights and acts as an interim measure of protection.

Section 148 says on filing a suit of Appeal, the court shall order the drawee to pay 20% of fine/award given by lower court within 60 days and can be returned back at any stage of proceedings.

Amendments have been India since time immemorial. Nothing can happen until the intentions of people playing to defraud don’t improve. Law is a method that provides remedies for violations but it is in human hands to prevent those violations. Until and unless Humankind doesn’t prevent violations on its own no law can provide speedy justice or rectify it. 

CONCLUSION

As we trace the history and establishment of the Negotiable Instruments Act,1881 and focus on the jurisdictional debate under Section 138, which deals with the dishonor of cheques, we analyze the necessities which forced the Courts and the Government to adopt landmark changes in the law. The latest change and the present prevalent law being the 2015 Ordinance, has the effect of nullifying the law as laid down by the Supreme Court in 2014, DasratRathod case. The legal effect of the Ordinance is that, so as to institute a complaint under Section 138, the same must be instituted as per: If the cheque is delivered for collection through an account, the branch of the bank where the payee or holder, maintains the account, is situated; or If the cheque is presented for payment by the payee or holder otherwise through his account, the branch of the drawee bank where the drawer maintains the account, is situated. This law comes with a promise to solve and aid in not only the speedy disposal of the pending cases pertaining to complaints under 138 but also to bring sanctity to the system by seeking to clamp down on defaults in payments. It clarifies the legal position as to jurisdiction and also seeks to keep up with the modern banking system.

BIBLIOGRAPHY

  • Negotiable Instrument Act
  • Civil Law Journal
  • Contract Act Bare Act
  • Contract Text-Book by  R.K Bangia
  • Guide No-1
  • Guide No-2

                                     WEBLIOGRAPHY

  • www.google.com
  • www.wikipedia.in
  • www.indiankanoon.in

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