
or
Since the Act is causing inconvenience to the business community and the general public, it would be worthwhile to amend the Act as recommended by The Law Commission of India, observes N Swaminathan
The Government of India through Ministry of Personnel, Public Grievances and Pension, Department of Personnel and Training, through the Notification No.12/3/2010-JCA-2 dated March 29, 2010 declared April 14, 2010 as official holiday on account of Shri. BR Ambedkar’s birthday for all Central government offices, including all industrial establishments throughout the territory of India.
It also declared in the same breath the said as a holiday under Section 25 of Negotiable Instruments Act, 1881 (the Act). This Notification was issued at a short notice of about 15 days before the said day, thus, causing inconvenience to the business community and to the general public at large.
Section 25 of the Act lays down that when the day on which a promissory note or bill of exchange is at maturity, is a public holiday then the instrument shall be deemed to be due on the next preceding business day.
As an effect of the Notification, all banks were closed on that day. A promissory note or bill of exchange at maturity on April 14, 2010 would have expired on April 13, 2010, i.e. one day before in view of the deeming provision contained in Section 25 of the Act. Section 6 of the Act defines cheque as “a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand…”
Therefore, a cheque is also a bill of exchange of a particular kind. However, whether Section 25 of the Act will apply to cheque is doubtful, Section 25 apparently says that it will apply only to promissory note and bill of exchange but does not specify cheque.
Wherever the Act intends to apply the provisions of the Act insofar as cheque, it has mentioned in no uncertain terms such application, for example, provisions contained in Chapter III and XVII. It is humbly submitted for the purpose of reviewing Section 25 of the Act that the said Section also applies to cheques in view of being a type of bill of exchange.
However, some of the banks in practice are not following this mandate and are giving leeway to the customer to deposit the cheque on the succeeding day.
The Law Commission of India in its 11th report, dated September 26, 1958 has recommended amendments to Section 25 of the Act. It has recommended for incorporating ‘succeeding business day’ rule in Section 25 instead of ‘next preceding business day’.
It would be pertinent here to note that Section 10 of General Clauses Act, 1897, which provides that where a law requires something to be done in any office on or within a certain day on which the office happens to be closed, such act may be considered as duly done, if its done on the next day on which the office opens.
In its current form, Section 25 is causing inconvenience to the business community and to the general public. It is contrary to the popular understanding that if the last day for depositing the cheque is a holiday under the Act, then the instrument can be deposited on the succeeding business day.
Assuming a case, where a cheque is at maturity on Monday, 1st January and it happens to be a holiday under Section 25 of the Act and the preceding day being a Sunday when banks are off, the cheque in question will be deemed to have expired on Saturday, December 30th of the preceding year. The customer loses two valuable days and is incapacitated by events, which are beyond his control and a valuable right of depositing the cheque within time is lost.
More than 50 years have passed since the Law Commission made the recommendation for the amendment of Section 25 of the Act. However, the recommendations of Law Commission have been lying in cold storage for years and the government has not taken care to implement the recommendations.
It is suggested that the Union government may take note of the above anomalies and bring the much needed amendment to Section 25 of the Act incorporating therein a) the succeeding day rule and b) clarifying that the said Section applies to cheque also, which as of now remains ambiguous.
N Swaminathan is a Senior Manager Legal and Regulatory at Bharti Infratel Limited. The views expressed above are his personal.
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