Amending Negotiable Instrument Act—II

Sections 10 and 13 are an important part of Negotiable Instrument (NI) Act 1881 because these sections define 'Payment in Due Course' which is considered as the best mode of payment in the eye of law. Any payment made by the banker has to be 'Payment in Due Course' in order to get protection under the NI Act. This is the only section under which a banker has been given immunity provided the payment has been made as 'Payment in Due Course'. According to this section, 'Payment in Due Course' means: "Payment is made in accordance with the apparent tenor of the instrument in good faith and without negligence to the person who is in possession of the instrument under circumstances which do not reasonably afford to believe that the person in possession thereof is not entitled to receive the payment".
From this complicated definition of 'Payment in Due Course', it is very difficult for a banker to determine the factors that need to be verified in order to ensure the 'Payment in Due Course'. This is more difficult for those who are working in the cash department or teller service department because these bankers come with very ordinary education and without any knowledge of legal language but their core functionality is to make payment against the cheque. Therefore, this section should be rewritten by replacing this complicated definition with precise steps or measures which will be verified or complied with before making any payment. Even there should be one checklist which is required to be meticulously followed by each banker before honouring any cheque. The provision may, however, be retained allowing each bank to develop its own checklist for honouring the cheque but this needs prior approval from the Bangladesh Bank.
ENDORSEMENT (SECTION 15 & 16):  Sections 15 and 16 of this Act describe endorsement which states that endorsement is the process of transferring ownership of the instrument. When the title of the instrument is transferred to the person with intent to make the transferee the owner of instrument, the process thereof is called endorsement which may require signature of the transferor and delivery of the instrument. For endorsement, signature of the transferor may not be mandatorily required, but delivery of the instrument is must to complete the endorsement process. According to this Act, only signing on the instrument may not be considered as endorsement while mere delivery can complete the endorsement.
Endorsement may, however, be blank or full because it is provided without mentioning the name of transferee. This is categorised as blank endorsement while endorsement provided with the name of the transferee is defined as full endorsement. Although the Act has legitimised honouring cheques with either endorsement, full endorsement is well secured because there is little scope of forgery or misunderstanding over the payment of cheque with full endorsement. In most of the cases, there is a wide scope of forgery and misunderstanding over the payment of cheque with blank endorsement. Since the transferee remains blank, anybody who is in possession of the instrument may become transferee. In the event the payment goes to the person not intended by the drawer or transferor, the payment is obviously challenged by the drawer or transferor and in that situation, the banker is always held responsible. So the weakness of the legal provision or the scope of abusing the section of the Act must be eliminated and therefore, this section should be redefined allowing only full endorsement and deleting blank endorsement.  
MINORS' RIGHT & RESPONSIBILITY (SECTION 26): This section states about the minor's right and responsibility and risk associated with transacting negotiable instrument when drawn or endorsed by minor. As per section 26 of NI Act, the minor can draw, accept and endorse negotiable instrument without binding himself. This implies that there is no bar on transacting with the minor but he or she cannot be held responsible if anything goes wrong with that transaction. However, this section does not specifically spell out exactly what a minor is allowed or entitled to do and at what extent the banker can transact with the minor in order to get protection under this Act. Consequently, most of the bankers are found to be in dilemma while transacting with the minor and in order to avoid any awkward situation, the banker always prefers a legal guardian to be accompanied with the minor for transacting negotiable instrument. Therefore, the section should be rewritten precisely mentioning what the minor is allowed and entitled to do and at the same time, the banker's responsibility should be specifically spelt out for which protection must be provided to the banker under this Act.  
BEARER & ORDER CHEQUE (SECTION 85): Section 85 of this Act discusses about the type of cheque which may be of two kinds and these are bearer cheque and order cheque. Originally, the cheque is made as bearer cheque inscribing the word 'Bearer' beside the payee's name. When the word 'Bearer' appears on the face of the cheque is crossed out, the cheque turns into an order cheque. In practice, the word 'Bearer' inscribed on the face of the cheque is penned through and the word 'Order' is inscribed for changing the status of bearer into order. However, as stated in this section, it is not necessary to write the word 'Order' because mere crossing out the word 'Bearer' turns the cheque into order cheque. This order cheque is another risky instrument on banker's point of view because the payment method as permitted under this section shifts the entire onus of the payment to the banker. Question arises whether the order cheque can be paid over the counter. Answer is yes, but through proper identification and this identification, in question, is a subjective matter and therefore, bankers always try to avoid payment of order cheque over the counter in order to avert any untoward incident likely to  arise out of the identification procedure. This reluctance of payment over the counter also annoys the payee of the cheque and resultantly unnecessary misunderstanding develops with the customer. This unwanted situation must be addressed by sealing the loophole of this section through removal of the provision of order cheque from the NI Act.
Incidentally, it may be mentioned here that there is a very subtle difference between order cheque and crossed cheque, as all crossed cheques must be order cheques but all order cheques may not be crossed cheques. This relationship has to be redefined by broadly classifying the cheque into two categories i.e. only bearer cheque and crossed cheque. Crossing of cheque has been discussed later under its respective section.
NOTING & PROTEST (SECTION 99 & 100): Under this section, the necessity of noting and lodging protest against dishonouring of negotiable instrument has been discussed. Compliance of this section is inevitably required in the event of dishonouring any foreign bills. Now-a-days, the issue of dishonouring cheque and defaulting promissory note is recorded differently, although formal noting or protest is hardly seen in the practical situation.
In our country, usual notification given by the bank stating dishonouring of cheque is considered as proof in the court so that formal noting or protest is not additionally practised. As discussed earlier, DP Note is executed against borrowing money from bank but the borrower binds himself by executing some other documents which are substantial enough to prove the borrower default and therefore, importance of DP Note in proving the borrower default is insignificant. So noting or protest of breaching the promise made through execution of Promissory Note is not found to be practised in the real-life scenario. Therefore, this section has lost its applicability and enforceability in the event of dishonouring of cheque and breach of DP Note and as such can be removed from this Act. It is to be mentioned that noting or protest of foreign bill should be done in a foreign country where the respective country's law will apply and this section of the NI Act will not come into effect. Nevertheless, this provision can be the part of separate Bill of Exchange Act for exclusively dealing with Bill of Exchange and receivables as whole.   

The writer, a banker, writes from Toronto, Canada.   
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