NEGOTIABLE INSTRUMENTS AND RELATED LAWS IN BANGLADESH A negotiable instrument is a document guaranteeing the payment of a specific amount of money, either on demand, or at a set time. According to the Negotiable Instruments Act, 1881, there are just three types of negotiable instruments i.e., promissory note, bill of exchange and cheque. More specifically, it is a document contemplated by a contract, hich !1" arrants the payment of money, the promise of or order for con#eyance of hich is unconditional$ !%" specifies or describes the payee, ho is designated on and memoriali&ed by the instrument$ and !'" is capable of change through transfer by #alid negotiation of the instrument. All negotiable instruments are similar in characteristics, although there are some differences among them. A negotiable instrument must be ritten and signed by the ma(er, it must be unconditional. )he sum mentioned in it is payable to its bearer or to a certain person or to his order. It is payable also on demand, or at a fixed or future date. All negotiable instruments are are transferable by mere deli#ery if payable payable to bearer, and by endorsement and deli#ery, if payable to order. Nego Negoti tiab able le inst instru rume ment ntss diffe differr in term termss of forma formali liti ties es to be foll follo oed ed for for thei theirr encashment. *ome instruments require to be stamped hile some others do not. +nli(e cheques, bills of exchange and promissory notes cannot be crossed. Acceptance is necessary for some but not for all negotiable instruments. )raditionally, use of these instruments is not idespread in the country. oe#er, ith the expansion of industriali&ation, trade, and commerce, these instruments are no more frequently used. +sually, holders of these bills sell them for cash to ban(s, hich pay the holder face #alue of the bills less collection charges and the interest for the remaining period of the bills.
Introduction: All negotiable instruments are similar in characteristics, although there are some differences among them. A negotiable instrument must be ritten and signed by the ma(er, it must be unconditional. )he sum mentioned in it is payable to its bearer or to a
certain person or to his order. It is payable also on demand, or at a fixed or future date. All negotiable instruments are are transferable by mere deli#ery if payable payable to bearer, and by endorsement and deli#ery, if payable to order. Negotiable instruments differ in terms of formal formaliti ities es to be follo folloed ed for their their encash encashmen ment. t. *ome *ome instru instrumen ments ts requir require e to be stamped hile some others do not. +nli(e cheques, bills of exchange and promissory notes cannot be crossed. Acceptance is necessary for some but not for all negotiable instruments. Definition of Negotiabe In!tru"ent: A negotiable instrument is a document guaranteeing the payment of a specific amount of money, either on demand, or at a set time. According to the Negotiable Instruments Act, 1881, there are just three types of negotiable instruments i.e., promissory note, bill of exchange and cheque. )he most common and popular form of negotiable instruments used in -angladesh is the cheque, hich is issued against deposit in ban(s. All offices of the deposit money ban(s are alloed to issue cheques to account holders against their current and sa#ings deposits only. No cheque can be issued against term or fixed deposit accounts. )he use of cheques as means of payment gre considerably ith the expansion of the ban(ing netor( throughout the country. )he use of promissory notes and bills of exchange are traditionally limited in -angladesh. romissory notes are issued by the go#ernment and held by the ban(. -an(s can a#ail of the discount indo facility of the -angladesh ban( against these instruments. )here are to (inds of bills of exchange in -angladesh/ foreign bills and internal bills. )raditionally, use of these instruments is not idespread in the country. oe#er, ith the expansion of industriali&ation, trade, and commerce, these instruments are no more frequently used. +sually, holders of these bills sell them for cash to ban(s, hich pay the holder face #alue of the bills less collection charges and the interest for the remaining period of the bills. A negotiabe in!tru"ent in!tru"ent i! a 1" 0rit 0ritte ten n ins instr trum umen ent, t, %" *igned *igned by by the ma(e ma(err or drae draerr of the the instru instrumen ment, t, '" )hat contains contains an an uncondi unconditiona tionall promise promise or order order to to pay pay " A fixed fixed amount amount of money money !ith !ith or ith ithout out inter interest est in a speci specifie fied d amount or at a *pecific rate. 2" 3n demand demand or at an exac exactt futur future e tim time e 4" )o a speci specific fic pers person, on, or or to orde order, r, or to to its bear bearer. er.
T#$e! of negotiabe in!tru"ent
1. rom romis isso sory ry Not Notes es,, %. -ill -illss of of exc excha hang nge e and and '. 5heques %& '(ro"i!!or# note' A 6promissory note6 is an instrument in riting !not being a ban(7note or a currency7 note" note" contai containin ningg an uncon uncondit dition ional al undert underta(i a(ing, ng, signed signed by the ma(er, ma(er, to pay 1on 1on demand or at a fixed or determinable future time9 a certain sum of money only to, or to the order of, a certain person, or to the bearer of the instrument.
ere is a specimen of promissory note gi#en belo/
)& 'Bi of e*c+ange' A 6bill of exchange6 is an instrument in riting containing an unconditional order, signed by the ma(er, directing a certain person to pay% on demand or at a fixed or determina determinable ble future time9 a certain certain sum of money only to, or to the order of, a certain certain person or to the bearer of the instrument. A promise or order to pay is not 6 conditional 6, ithin the meaning of this section and section section , by reason reason of the time for paymen paymentt of the the amount amount or any insta installmen llmentt thereof being expressed to be on ,the lapse lapse of a certain period after the occurrence of a specified e#ent hich, according to the ordinary expectation of man(ind, is retain to happen, although the time of its happening may be uncertain. )he sum payable may be 6certain6, ithin the meaning of this section and section , although it includes future future interest or is pay able able at an indicated rate of exchange, exchange, or is according to the course of exchange, and although although the instrument instrument pro#ides that, that, on default default of payment payment of of an installm installment, ent, the the balance balance unpaid unpaid shall shall become become due. due. )he person to hom it is clear that the direction is gi#en or that payment is to be made may be a 6certain I person6, ithin the. A *pecimen is gi#en belo/ belo/
,& '-+e.ue' A 6cheque6 is a bill of exchange dran on a specified ban(er and not expressed to be payable otherise than on demand. A cheque is a bill of exchange dran on a specified ban(er and not expressed to be paya payabl ble e othe other ris ise e than than on dema demand nd.. !*. !*. 4 of the Act" )hus, )hus, a cheq cheque ue is a bill bill of exchan exchange ge and hence hence it is to comply comply ith all the essenti essential al of bill bill of exchang exchange e as prescribed in section 2 of the Act. -ut a cheque has to distincti#e features, namely/ !i" it is alays dran on a ban(, and !ii" it is alays payable on demand. 6In addition it is to be noted, a cheque is presented for payment, hereas a bill in the first instance is presented for acceptance unless it is a bill on demand. A bill is dishonoured by non7acceptance, this is not so in the case of a cheque. )hese essential differences !besides others" are sufficient to explain hy in practice cheques are not accepted. Acceptance is not necessary to create liability to pay as beteen the draer and the draee ban(. )he liability depends on contractual relationship beteen the ban( and the draer, its. customer. 3ther things being equal, in particular if the customer has sufficient funds or credit a#ailable ith the ban(, the ban( is bound either to pay a cheque or to dishonour it at once .... It is different in case of an ordinary bill$ the draee is under no liability on the instrument until he accepts$ his liability on the bill depends on the acceptance of it.6 T+ere are certain "atter! to be noted regarding a c+e.ue: 1. A cheque is alays dran on a ban(er %. A cheque can only be dran payable on demand. A future7dated cheque, being not payable on demand, may not be regarded as a cheque in the real sense of the ord unless that date arri#es and it becomes payable on demand. '. A cheque does not require any acceptance by the draee before payment can be demanded. . cheques can be crossed to restrict the payment to the person so named. )he phrase 6in good faith and for #alue6 has been split up by *ection : into four elements all of hich must concur to ma(e a holder in due course. )hey are/ !1" )he holder must ha#e ta(en ta(en the instrument instrument for #alue. !%" e must ha#e obtained the instrument before its maturity. !'" )he instrument must be complete and regular on its face. !" e must ha#e ta(en the instrument in good faith and ithout notice of any defect either in the instrument or in the title of the person negotiating it to him.
*pecimen of cheque/
Di!+onour of c+e.ue: )he ban( on hich a cheque is dran may not ha#e sufficient fund in the the account in question to ma(e payment accordingly accordingly and hence the ban( may choose choose to refuse the paym paymen entt dema demand nded ed by the the hold holder er.. Non7 Non7pa paym ymen entt by the the ban( ban( is refe referr rred ed to as ;dishonour of cheque< in hich e#ent the holder holder becomes entitled to sue the the draer for the money. *ection 1'8 of the the Act regards such such an act of the draer as an offence offence and prescribes the remedies a#ailable by a holder. -ut to acti#ate acti#ate this this *ectio *ection n the the cheque cheque in question question is to be present presented ed to the ban( ithin a period of six months from the date on hich it is dran or ithin the period of its #alidity, hiche#er is earlier$ In case of dishon dishonour our of a cheque cheque the holder holder is required required to do certain certain things things to get get assistance of la to to reco#er the money. Notice: )he holder is is to gi#e a formal notice to the draer of the cheque communicating him the e#en e#entt of dishon dishonour our ma(i ma(ing ng a demand demand for for the the money. money. -ein -eingg so notifi notified ed if the the draer fails to pay, a regular suit can be filed under *ection 1'8 of the Act. (uni!+"ent: )he e#ent of dishonour dishonour of cheque cheque subjects subjects the draer to punishmen punishment. t. e may be punished ith imprisonment for a term hich may extend to one year, or ith fine hich may extend extend to thrice the the amount of the cheque, cheque, or ith both both . SE-TION %,/ O0 NEGOTIABLE INSTRUMENTS A-T Hi!tor# / =arlier to 1:88 the dishonour of cheque as only a ci#il liability. -ut the amendment introduced by Amendment Act No.44>1:88 hich as published in the ga&ette of India part part7I 7II, I, date dated d 1:.1 1:.1%.1 %.1:8 :88, 8, intr introd oduc uced ed *ecti *ection on 1'8 1'8 and and 1% 1% of the the Nego Negoti tiab able le Instruments Act hich made it a criminal offence. )his amendment as a ne offence in the commercial filed, it as brought out of necessity in order to bring sanctity to the common business transactions
W+at a"ount! to to an offence u1!&%,/ of Negotiabe In!tru"ent In!tru"ent Act: *ection 1'8 reads as follos
?@.%,/& ?@.%,/& Di!+onour of c+e.ue for in!ufficienc#2 etc&2 of fund! in t+e account! 0here any cheque dran by a person on an account maintained by him ith a ban(er for payment of any amount of money to another person from out of that account for the discharge, in hole or in part, of any debt or other liability, is returned by the ban( unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made ith that ban(, such person shall be deemed to ha#e committed an offence and shall ithout prejudice to any other pro#isions of this Act, be punished ith imprisonment for a term hich may extend to one year, or ith fine hich may extend to tice the amount of the cheque, or ith both/ 3BIC=C that nothing contained in this section shall apply unless7 !a" the cheque has been presented to the ban( ithin a period of six months from the date on hich it is dran or ithin the period of its #alidity, hiche#er is earlier. !b" the payee or the holder in due course of the cheque, as the case may be, ma(es a demand for the payment of the said amount of money by gi#ing a notice, in riting, to the draer of the cheque, ithin fifteen days of the receipt of information by him from the ban( regarding the return of the cheque as unpaid, and !c" the draer of such cheque fails to ma(e the payment of the said amount of money to the payee or, as the case may be, to the holder in due course of the cheque, ithin fifteen days of the receipt of the said notice. =xplanation/ Dor the purpose of this section, 6debt or other liability6 means a legally enforceable debt or other liability.E )hus *ection 1'8 of N.I.Act, states that hen a person issues a cheque to be encashed and the cheque so issued is issued toards payment of a ;debt< or liability and it is returned unpaid for ant of funds, the person issuing such a cheque shall be deemed to ha#e ha#e comm commit itte ted d an offe offenc nce. e. *ecti *ection on 1'8 1'8 pres presup uppo pose sess thre three e cond condit itio ions ns for for prosecution of an offence they are/ a. 5heque shall be presented for payment ithin six months from the date of issue or before expiry of its #alidity. b. )he holder shall issue notice demanding payment in riting to the draer ith in one month of the receipt of information of the bounced cheque, and c. )he draer inspite of the demand notice fails to ma(e payment ithin one month of the receipt of the notice.
If the abo#e three conditions are satisfied the holder in due course gets the cause of action to launch prosecution against the draer of the bounced cheque. Ho3 !+oud t+e co"$aint for di!+onour of c+e.ue be odged for t+e offence $uni!+abe u1!&%,/ of t+e Negotiabe In!tru"ent Act4 *ec.1% of the Act en#isages the method of lodging the complaint for the offence punishable u>s.1'8 of the Negotiable Instrument Act. -ogni5ance of offence!: As per this *ection notithstanding notithstanding anything contained in the 5ode of 5riminal rocedure/ a. no court shall ta(e cogni&ance of any offence punishable u>s.1'8 except upon a complaint, in riting, made by the payee or, as the case may be, the holder in due course of the cheque, b. such complaint complaint is made ithin one month of the date on hich the cause of action arises under clause !c" of the pro#iso to *ec.1'8, ro#ided that the cogni&ance of the complaint may be ta(en by the court after the prescribed period, if the complainant satisfies the court that he had sufficient cause for not ma(ing a complaint ithin such period9 c. no court inferior to that of a Metropolitan Magistrate or a Fudicial Magistrate of the Dirst 5lass shall try any offence off ence punishable u>s.1'8. )he cases filed under sec.1'8 of the Negotiable Instrument Act are tried summarily. )hus for an offence to be made out and to set the criminal c riminal la in motion for the offence punishable u>s.1'8 of the Negotiable Instrument Act 3ne should lodge a complaint in riting made ithin 'G days from the date of cause of action by the payee or holder in due course has to file a complaint before the Furisdictional court u>s.%GG of 5r..5.. 0hen the complaint is presented for the said offence the court has to follo the procedure prescribed u>s.%GG of 5r..5i9 5r..5 i9.. 0hich reads as follos/ If the complaint so filed is made ithin limitation !time" and preconditions prescribed u>s.1'8 are complied ith, court has to ta(e cogni&ance of the offence and record sorn statement, then process shall be issued to the accused. )he Magistrate shall not refer the complaint to the police for in#estigat in#estigation ion u>s.124!'" u>s.124!'" of 5r..5. 5r..5. as the offence u>s.1'8 of the Negotiable Instrument Act is non7cogni&able offenceii9 offence ii9..
(re!u (re!u"$t "$tion ion regard regarding ing t+e offenc offence e u1!&%, u1!&%,/ / of Negoti Negotiab abe e In!tr In!tru" u"ent ent Act in fa6our of +oder: 0hen a complaint is file under *ection 1'8 the court presumes that unless contrary is pro#ed, the holder of cheque recei#ed the notice and failed to ma(e necessary payment as referred to in *ec.1'8 for the discharge in hole or in part any ega# 6aid 7debt8 7debt8 or 7iabiit#8. 7iabiit#8. *o, there is presumption that
