Section 138 of negotiable instruments act, 1881
Vinoba
(Querist) 06 April 2012
This query is : Resolved
Sir/Madame,
My query is that the Reserve Bank of India during the month of November 2011 has announced that from 1st April 2012 the period of validity of a cheque will be 3 months instead of the prevailing 6 months. To my little knowledge in Section 138 Proviso (a) of the Negotiable instruments Act, 1881 there was no amendment made in this regard. Under such precarious situation, which one we have to stick with: Whether the Negotiable Instruments Act or the guidelines given by the Reserve Bank of India? Please clarify me....
Raj Kumar Makkad
(Expert) 06 April 2012
Guidelines of RBI shall prevail over all such provisions means now onwards the validity of the cheque shall be of 3 months instead of 6.
Deepak Nair
(Expert) 06 April 2012
Yes. The cheques will be valid for only 3 months. The guidelines of RBI will prevail above 138.
Nadeem Qureshi
(Expert) 06 April 2012
Dear Querist
I agree with Mr. makkad
DEFENSE ADVOCATE.-firmaction@g
(Expert) 06 April 2012
Mr Vinoba you say you have little knowledge but you have fathomed out big query.
Ld experts have given you proper response and just a feed for your mind the law has made proper provisions before hand in following words---
WITHIN THE PERIOD OF ITS VALIDITY WHICH EVER IS EARLIER.
ajay sethi
(Expert) 06 April 2012
yes RBI circular will determine validity of cheque
SAINATH DEVALLA
(Expert) 06 April 2012
Dear Vinobha,
RBI is the supreme authority in decision making.Once the amendment is made by RBI means that it is put into force,according to the dates mentioned.
V R SHROFF
(Expert) 06 April 2012
No cheque will be accepted by Bank after 3 months date.
So automatically, NI act, The guidelines of RBI will prevail above 138.
prabhakar singh
(Expert) 06 April 2012
With due respect I beg to DIFFER with all those you who hold opinion that in case of conflict between a statute passed by legislature and RBI guide lines, it is the RBI guide lines which shall prevail over the legislated statute.Despite RBI has absolute powers to govern and regulate fiscal and banking matters,it's guide line can not be seen above any statute.
HOWEVER THERE IS NO CONFLICT WITH THE GUIDELINES AND PROVISION CONTAINED IN 138 OF N.I.Act.
WE ARE REQUIRED TO READ IT CARE FULLY.NOTICE the phrase used in the section.
"Provided that nothing contained in this section shall apply unless-
(a) The cheque has been presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier."
SO ON A CAREFUL EXAMINATION ANY OF US WOULD FIND THAT GOVERNING WORDS IN THE SECTION ARE "or within the period of its validity, whichever is earlier." and hence recent guide lines of RBI are not in conflict of the provisions contained in section 138 of N.I.ACT.
Guest
(Expert) 06 April 2012
Here in this case the question of tenor of the instrument arises on which the provision of section 138 hinges.
Although the Judiciary is not bound to be guided by the RBI guidelines against the provisions of existing statute until the statute is not amended appropriately through an Act of legislature, but in such a case, the section 138 has to be read in juxtaposition with the provisions of section 10 of the NI Act, which states about the "payment in due course" of the instrument.
The said section provides for the tenor of the instrument, which has now been changed by the RBI from 6 months to 3 months. According to the said section, "Payment in due course" means payment in accordance with the apparent TENOR OF THE INSTRUMENT in good faith and without negligence to any person in possession thereof under circumstances which do not afford a reasonable ground for believing that he is not entitled to receive payment of the amount therein mentioned.
Thus, section 10 accommodates the RBI guidelines automatically and has direct effect on the provisions of sec.138.
Deepak Nair
(Expert) 06 April 2012
Experience speaks.
Thanks a lot Prabhakar Sir.
V R SHROFF
(Expert) 06 April 2012
THANKS PRABHAKARJI.
venkatesh Rao
(Expert) 06 April 2012
Experts,
Prabhakar Ji is absolutely correct. NI Act is a central Act and prevails over any directives, circulars, mandates etc issued by RBI. Even if the period is specifically mentioned in NI Act as 6 months, then it would be ultra vires for RBI to reduce the period for three months.
C. P. CHUGH
(Expert) 07 April 2012
Prabhakar ji has rightly explained, Our law amkers are wise enough to forsee such situations and had made appropriate arrangements to deal with changing situations. Section 138 of NI mandates in clear words that the cheque in question has to be presented within six months or within the period of its validity whichever is earlier. There is nothing more which could be clarified.
Shonee Kapoor
(Expert) 07 April 2012
I agree with Ld. Prabhakar Ji and Ld. Dhingra Ji.
Regards,
Shonee Kapoor
harassed.by.498a@gmail.com
prabhakar singh
(Expert) 07 April 2012
Thanks with obligation to all of you who accepted my point of view.
The phrase "apparent tenor"used in the section 10 conveys nothing with time validity of presentation of a cheque.The word apparent denotes meaning "as it looks to be on very face or in other wards exposed to sight"and word tenor denotes meaning" meaning that runs through something written or spoken"
I would like to clear that section 10 has no meaning as being understood here by one of us.Section 10 is all about paying or honoring a cheque when presented for payment,then if paid and honored in due course but without negligence and in good faith,then would be deemed to have been paid in due course.It would be proper for us to relate it with provisions contained in section 31 where " The drawee of a cheque having sufficient funds of the drawer in his hands properly applicable to the payment of such cheque must pay the cheque when duly required to do so, and in default of such payment, must compensate the drawer for any loss or damage caused by such default."and also section 89 wherere it is laid "Payment of instrument on which alteration is not apparent, where a promissory note, bill of exchange or cheque has been materially altered but does not appear to have been so altered, or where a cheque is presented for payment which does not at the time of presentation appear to be crossed or to have had a crossing which has been obliterated,. payment thereof by a person or banker liable to pay and paying the same according to the apparent tenor thereof at the time of payment and otherwise in due course, shall discharge such person or banker from all liability thereon, and such payment shall not be questioned by reason of the instrument having been altered or the cheque crossed."This is how things are placed in the statute under reference.
Hence a cheque has to be paid in and it would be deemed to have been paid in due course if it has been paid in good faith without negligence in accordance with its'apparent tenor,i.e.,as it looks to on its' very face and no fraud or forgery or alteration appears on its' very face even after due diligence and care taken by the banker honoring it.So it relates to duties and proof of payment by bank honoring it.Such payment being deemed as payment in due course.Section 10 is a plea of defence available to the drawee of a cheque after it has paid or honored the cheque of the drawer from funds in its hand in the account of the drawer.
I hope none gets hurt by this explanation.
Guest
(Expert) 07 April 2012
Hi Experts,
I am thankful to Mr. Prabhaksr Singh, who has given me the opportunity to give my clarification on my earlier views with particular reference to his present post. But, I knew fully well that Mr. Prabhakar Singh would definitely respond against my views, as usual, with the intention to prove me wrong somehow or the other. For his knowledge, I may point out that I do not ordinarily base my views merely on dictionary meanings but use official legal glossary for the purpose of legal issues.
Here with reference to sec.10, instead of literal meaning of the term tenor, the legal meaning intended to be conveyed by section-10 is required to be taken in to consideration. I would request Shri Prabhakar, along with all other experts, to refer to the LEGAL GLOSSARY (1988 Edition), as issued by the then Ministry of Law & Justice. The said glossary very clearly explin the term with meaning, as "THE TIME BETWEEN THE DATE OF ISSUE or acceptance of a note or draft AND THE MATURITY DATE," along with other meanings, like, the exact words of the document, the actual wording of a legal documents, what appears on the face of the instrument to be the intention of the parties, etc.
Contrarily, sec.31, as quoted by Shri Prabhakar, relates merely to the liabilty of the drawee of the cheque and does not speak anything about the maturity or validity of the cheque to represent the period of "due course of payment". Also Sec.89, as referred to by Shri Prabhakar ji, refers to "due course of payment" and "tenor" that has direct link with sec.10.
Since, the face of the cheque does not indicate the maturity date, the same has to be taken in to account as per the guidelines of the RBI, which can be taken in to account by invoking provisions of sec.10. In fact, I endorsed his own view points on the RBI guidelines by supplementing his reply only. But, probably he took my views as against his own views, with the reason best known to him.
Rest depends upon the individual interpretations by the experts.
venkatesh Rao
(Expert) 07 April 2012
Dear experts,
This platform has enriched me like anything. This query (Gods sake, not styled academic by experts)is timely one and good outcome through healthy discussion. many many thanks to Prabhakar and Dhingra and Chugh.
R Trivedi
(Expert) 08 April 2012
In none of the sections of NI Act, the validity period of the cheque is mentioned, so there is no conflict. S.138 is also very clear, there is no ambiguity.
S.138 covers other negotiable Instruments also which may have higher period validity, so there is no need for any amendment in NI act either.
Vinoba
(Querist) 08 April 2012
I had the pleasure of discussing one of the important topic with eminent lawyers. "www.lawyersclubindia.com" has been a good platform for advocates community to have such discussions. I am thankful for the experts who gave their valuable suggestions in quick time. I am convinced with the reply & suggestions given by the experts. I once again thank the experts for spending their valuable time to solve the query.
Vinoba.L
Advocate,
Pondicherry.
prabhakar singh
(Expert) 08 April 2012
Bank Of Maharashtra vs Automotive Engineering Co. on 8 December, 1992
Equivalent citations: I (1993) BC 1 SC, 1993 77 CompCas 87 SC
Author: G Ray
Bench: B J Reddy, G Ray
"10. After considering the relevant facts and circumstances of the case and the contentions made by the learned Counsels for the parties, it appears to us that the court of appeal below has categorically come to the finding that on visual examination no sign of forgery or tampering with the writings on the cheque could be detected. There is also evidence on record which has not been upset by the court of appeal below that the then agent of the bank had taken the care to verify the serial number of the cheque, the signature on the cheque with the specimen signature of the constituent, namely, the defendant and on a scrutiny of the cheque visually no defect could be detected by him. It also transpires from the evidence that the defendant had sufficient amount in the bank to cover the said payment of Rs. 6,500/- at the relevant date when the cheque was presented for payment. Under Section 31 of the Negotiable Instruments Act, the appellant-Bank had a liability to honour the said cheque and make payment if the cheque was otherwise in order. 'Payment in due course' under Section 10 of the Negotiable Instruments Act means payment in accordance with the apparent tenor of the instrument in good faith and without negligence. In the facts of the case, there was no occasion to doubt about the genuineness of the cheque from the apparent tenor of the instrument. There is nothing on record from which it can be held that the payment of the said cheque has not been made in good faith. Although no straight-jacket formula can be laid down to cover each case of negligence of a banker and the question of negligence requires to be decided in the facts and circumstances in each case, it does not appear to us that the appellant bank can be held to be guilty of negligence simply because an ultraviolet ray lamp was not kept in the branch and the cheque in question was not subjected under the ultraviolet ray lamp. It has not been established in evidence that invariably the other branches of the appellant bank or the other commercial banks had been following a practice of scrutinising each and every cheque under the ultraviolet ray lamp or there was any prevalent practice to scrutinise cheques involving a particular amount under such lamp by way of extra precaution. In such circumstances, it cannot be contended as a correct legal proposition that the bank, in order to get absolved from the liability of negligence, was under an obligation to verify the cheque for further scrutiny under advanced technology or for that matter under ultraviolet ray lamp apart from visual scrutiny. The cost of the ultraviolet ray lamp was only nominal and it might have been desirable to keep such lamp in the branch in question to take aid in appropriate case. But even then, it cannot be contended that although no forger could be detected on visual scrutiny on the apparent tenor of the cheque in, question and the reasonable care by way of scrutiny of the cheque with reference to its serial number, verification of the specimen signature of the signatory of the cheque had been made, the bank officials should have resorted to scrutiny of the cheque under ultraviolet ray lamp by way of additional precaution and by not taking such extra precaution the bank may be held guilty of negligence. We do not think that there was any justification for the courts below to proceed to the footing that the Bank had failed to take reasonable care in passing the cheque for payment. without subjecting it for further scrutiny under ultraviolet ray lamp because the branch was on the outskirt of the metropolitan city of Bombay and in an industrial area where such forgery was rampant, particularly when other branches of the appellant-Bank were provided with such lamp. We, therefore, allow this appeal, set aside the judgment and decree passed in the suit since affirmed by the court of appeal below and also by the High Court. In the facts of the case, we, however, decree the suit only for the principal amount without any interest on the same. There will be, however, no order as to costs."
Fortunately this binding judgement shall clarify the confusion created by term"apparent tenor"used in section 10 to all those who have even little understanding of law.
In my first post I meant to say that:
1.A statute is above all rules ,GOs,circulars etc.,which can be framed only with in scope of the Act and not beyond that.
2.The second point in my first post meant to say that section 138 is self sufficient about the validity period which may be defined for any number of days by the regulator but it can not be more than 06 months.
Then came an interpretation that the mater
is to be seen with reference to section 10 of N.I.ACT.
Hence my second post was made.Let any body read any glossary I firmly hold my view submitted in my second post for good and valid reasons.The case law cited by me here in this post is sufficient to support my view.
I do not press any body to agree or dis agree nor do I agree or disagree with any body for the sake of company.A lawyer has to take a side and to support that.The other lawyer has also a side and he has to support that side.Likewise it may go here too.I do not claim to be a GOD FATHER. Its'not a compulsion that we always agree with each other yet there are certain things even in law where 2+2 can not make a 5.
I have no answer to "a prejudiced mind
who think that I deliberately disagree to prove him wrong"If my answer sheet is checked from beginning,it would be found that whenever i have found Mr. Dhingra's answer correct,some time far superior than that i could write,i opted to just assent his answer.I do not dispute he has very good knowledge of service rules and labor laws.
Guest
(Expert) 08 April 2012
It is not understood in what way the judgment of 1992 about liability of payment and the issue of forgery of cheque can be applied on the issue of the maurity issue of cheque as per latest amendment effective from April 2012? Of course in this case the term tenor has been used to verify the facts on the face of the instrument. But tenor is used for maturity period also, which is not available on the face of the instrument.
About his remarks "I have no answer to "a prejudiced mind," Mr. Prabhakar Singh may treat me as a prejudiced mind, but his admission is sufficient for me to know that he does not have answer to my interpretation. Any irrelevant cse law cannot justify his stand. My best wishes for him if his interpretation stands in good stead. Of course law is not a mathematical formula that can be applied to prove 2+2=5. That needs proof and correct interpretation.
prabhakar singh
(Expert) 08 April 2012
IF "I AM IDIOT " WHAT CAN others do???????????
prabhakar singh
(Expert) 08 April 2012
DEGENERATES REMAIN DEGENERATES????
IMPROVEMENTS TAKE CENTURIES.
prabhakar singh
(Expert) 08 April 2012
IT IS NOT UNDERSTOOD HOW COMES SECTION 10 TO DANCE IN COURT YARD OF SECTION 138?????????????????
