A cheque is a negotiable instrument that is used to order a bank to pay a certain amount of money to the payee. It is a very common form of payment in India.
In recent years, there has been a growing trend towards using electronic cheques and truncated cheques. Electronic cheques are cheques that are created, stored, and processed in electronic form. Truncated cheques are cheques where the physical cheque is truncated (i.e., the physical cheque is not physically moved from the drawer’s bank to the payee’s bank).
The Information Technology Act, 2000 (IT Act) is the main law governing the use of electronic records and digital signatures in India. The IT Act also applies to electronic cheques and truncated cheques.
Section 81A of the IT Act
Section 81A of the IT Act provides that the provisions of the IT Act shall apply to, or in relation to, electronic cheques and truncated cheques subject to such modifications and amendments as may be necessary for carrying out the purposes of the Negotiable Instruments Act, 1881 (NI Act).
The following are some of the key provisions of Section 81A of the IT Act:
- An electronic cheque shall be deemed to be a negotiable instrument for the purposes of the NI Act.
- The provisions of the NI Act relating to the execution, presentation, dishonor, and payment of cheques shall apply to electronic cheques and truncated cheques.
- The provisions of the NI Act relating to the liability of drawers, drawees, and endorsers of cheques shall apply to electronic cheques and truncated cheques.
- The Central Government may, in consultation with the Reserve Bank of India, make rules to regulate the issuance, acceptance, and clearance of electronic cheques and truncated cheques.
MCQs on the Application of the IT Act to Electronic Cheque and Truncated Cheque
- Which of the following statements is correct?
- Electronic cheques are not negotiable instruments.
- The provisions of the NI Act do not apply to electronic cheques.
- The provisions of the NI Act relating to the execution, presentation, dishonor, and payment of cheques do not apply to electronic cheques.
- The provisions of the NI Act relating to the liability of drawers, drawees, and endorsers of cheques do not apply to electronic cheques.
The correct answer is (c). The provisions of the NI Act relating to the execution, presentation, dishonor, and payment of cheques do apply to electronic cheques.
- Which of the following statements is incorrect?
- The Central Government may, in consultation with the Reserve Bank of India, make rules to regulate the issuance, acceptance, and clearance of electronic cheques and truncated cheques.
- An electronic cheque shall be deemed to be a negotiable instrument for the purposes of the NI Act.
- The provisions of the NI Act relating to the liability of drawers, drawees, and endorsers of cheques do not apply to electronic cheques.
- The provisions of the NI Act relating to the execution, presentation, dishonor, and payment of cheques do not apply to truncated cheques.
The correct answer is (c). The provisions of the NI Act relating to the liability of drawers, drawees, and endorsers of cheques do apply to electronic cheques.
Conclusion
The IT Act provides a comprehensive legal framework for the use of electronic cheques and truncated cheques in India. The provisions of the IT Act ensure that electronic cheques and truncated cheques are treated in the same way as physical cheques for the purposes of the NI Act. This provides legal certainty and helps to promote the use of electronic cheques and truncated cheques in India.