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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, which
(1) warrants the payment of money, the promise of or order for conveyance of which is
unconditional;
(2) specifies or describes the payee, who is designated on and memorialized by the
instrument; and
(3) is capable of change through transfer by valid negotiation of the instrument.
All negotiable instruments are similar in characteristics, although there are some
differences among them. A negotiable instrument must be written and signed by the
maker, it must be unconditional. The 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 transferable by mere delivery if payable to bearer, and by
endorsement and delivery, if payable to order.
Negotiable instruments differ in terms of formalities to be followed for their
encashment. Some instruments require to be stamped while some others do not.
Unlike cheques, bills of exchange and promissory notes cannot be crossed. Acceptance
is necessary for some but not for all negotiable instruments.
Traditionally, use of these instruments is not widespread in the country. However, with
the expansion of industrialization, trade, and commerce, these instruments are now
more frequently used. Usually, holders of these bills sell them for cash to banks, which
pay the holder face value 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 written and signed by the
maker, it must be unconditional. The 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 transferable by mere delivery if payable to bearer, and by
endorsement and delivery, if payable to order. Negotiable instruments differ in terms of
formalities to be followed for their encashment. Some instruments require to be
stamped while some others do not. Unlike cheques, bills of exchange and promissory
notes cannot be crossed. Acceptance is necessary for some but not for all negotiable
instruments.
Definition of Negotiable Instrument:
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.
The most common and popular form of negotiable instruments used in Bangladesh is
the cheque, which is issued against deposit in banks. All offices of the deposit money
banks are allowed to issue cheques to account holders against their current and savings
deposits only. No cheque can be issued against term or fixed deposit accounts. The use
of cheques as means of payment grew considerably with the expansion of the banking
network throughout the country. The use of promissory notes and bills of exchange are
traditionally limited in Bangladesh. Promissory notes are issued by the government and
held by the bank. Banks can avail of the discount window facility of the Bangladesh
bank against these instruments.
There are two kinds of bills of exchange in Bangladesh: foreign bills and internal bills.
Traditionally, use of these instruments is not widespread in the country. However, with
the expansion of industrialization, trade, and commerce, these instruments are now
more frequently used. Usually, holders of these bills sell them for cash to banks, which
pay the holder face value of the bills less collection charges and the interest for the
remaining period of the bills.
A negotiable instrument is a
1) Written instrument,
2) Signed by the maker or drawer of the instrument,
3) That contains an unconditional promise or order to pay
4) A fixed amount of money (with or without interest in a specified
amount or at a Specific rate.
5) On demand or at an exact future time
6) To a specific person, or to order, or to its bearer.

Types of negotiable instrument

1. Promissory Notes,
2. Bills of exchange and
3. Cheques
1. "Promissory note"
A "promissory note" is an instrument in writing (not being a bank-note or a currencynote) containing an unconditional undertaking, signed by the maker, to pay 1[on
demand or at a fixed or determinable future time] a certain sum of money only to, or to
the order of, a certain person, or to the bearer of the instrument.

Here is a specimen of promissory note given below:

2. "Bill of exchange"
A "bill of exchange" is an instrument in writing containing an unconditional order,
signed by the maker, directing a certain person to pay2 [on demand or at a fixed or
determinable future time] a certain sum of money only to, or to the order of, a certain
person or to the bearer of the instrument.
A promise or order to pay is not " conditional ", within the meaning of this section
and section 4, by reason of the time for payment of the amount or any installment
thereof being expressed to be on ,the lapse of a certain period after the occurrence of
a specified event which, according to the ordinary expectation of mankind, is retain
to happen, although the time of its happening may be uncertain.
The sum payable may be "certain", within the meaning of this section and section
4, although it includes future interest or is pay able at an indicated rate of exchange, or
is according to the course of exchange, and although the instrument provides that, on
default of payment of an installment, the balance unpaid shall become due. The
person to whom it is clear that the direction is given or that payment is to be made may
be a "certain I person", within the.
A Specimen is given below:

3. "Cheque"
A "cheque" is a bill of exchange drawn on a specified banker and not expressed to be
payable otherwise than on demand.
A cheque is a bill of exchange drawn on a specified banker and not expressed to be
payable otherwise than on demand. (S. 6 of the Act) Thus, a cheque is a bill of
exchange and hence it is to comply with all the essential of bill of exchange as
prescribed in section 5 of the Act. But a cheque has two distinctive features, namely:
(i) it is always drawn on a bank, and
(ii) it is always payable on demand.
"In addition it is to be noted, a cheque is presented for payment, whereas a bill in the
first instance is presented for acceptance unless it is a bill on demand. A bill is
dishonoured by non-acceptance, this is not so in the case of a cheque. These essential
differences (besides others) are sufficient to explain why in practice cheques are not
accepted. Acceptance is not necessary to create liability to pay as between the drawer
and the drawee bank. The liability depends on contractual relationship between the
bank and the drawer, its. customer. Other things being equal, in particular if the
customer has sufficient funds or credit available with the bank, the bank is bound either
to pay a cheque or to dishonour it at once .... It is different in case of an ordinary bill;
the drawee is under no liability on the instrument until he accepts; his liability on the
bill depends on the acceptance of it."
There are certain matters to be noted regarding a cheque:
1. A cheque is always drawn on a banker
2. A cheque can only be drawn payable on demand. A future-dated cheque, being not
payable on demand, may not be regarded as a cheque in the real sense of the word
unless that date arrives and it becomes payable on demand.
3. A cheque does not require any acceptance by the drawee before payment can be
demanded.
4. cheques can be crossed to restrict the payment to the person so named.
The phrase "in good faith and for value" has been split up by Section 9 into four
elements all of which must concur to make a holder in due course. They are:
(1) The holder must have taken the instrument for value. (2) He must have obtained
the instrument before its maturity. (3) The instrument must be complete and
regular on its face. (4) He must have taken the instrument in good faith and
without notice of any defect either in the instrument or in the title of the person
negotiating it to him.
Specimen of cheque:

Dishonour of cheque:
The bank on which a cheque is drawn may not have sufficient fund in the account in
question to make payment accordingly and hence the bank may choose to refuse the
payment demanded by the holder. Non-payment by the bank is referred to as
dishonour of cheque in which event the holder becomes entitled to sue the drawer
for the money. Section 138 of the Act regards such an act of the drawer as an offence
and prescribes the remedies available by a holder.
But to activate this Section the cheque in question is to be 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;
In case of dishonour of a cheque the holder is required to do certain things to get
assistance of law to recover the money.
Notice:
The holder is to give a formal notice to the drawer of the cheque communicating him
the event of dishonour making a demand for the money. Being so notified if the
drawer fails to pay, a regular suit can be filed under Section 138 of the Act.
Punishment:
The event of dishonour of cheque subjects the drawer to punishment. He may be
punished with imprisonment for a term which may extend to one year, or with fine
which may extend to thrice the amount of the cheque, or with both .
SECTION 138 OF NEGOTIABLE INSTRUMENTS ACT
History:
Earlier to 1988 the dishonour of cheque was only a civil liability. But the amendment
introduced by Amendment Act No.66/1988 which was published in the gazette of India
part-II, dated 19.12.1988, introduced Section 138 and 142 of the Negotiable
Instruments Act which made it a criminal offence. This amendment was a new offence
in the commercial filed, it was brought out of necessity in order to bring sanctity to the
common business transactions

What amounts to an offence u/s.138 of Negotiable Instrument Act:


Section 138 reads as follows

.138. Dishonour of cheque for insufficiency, etc., of funds in the accounts


Where any cheque drawn by a person on an account maintained by him with a banker
for payment of any amount of money to another person from out of that account for the
discharge, in whole or in part, of any debt or other liability, is returned by the bank
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 with that bank, such person shall be deemed
to have committed an offence and shall without prejudice to any other provisions of
this Act, be punished with imprisonment for a term which may extend to one year, or
with fine which may extend to twice the amount of the cheque, or with both:
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.
(b) the payee or the holder in due course of the cheque, as the case may be, makes a
demand for the payment of the said amount of money by giving a notice, in writing, to
the drawer of the cheque, within fifteen days of the receipt of information by him from
the bank regarding the return of the cheque as unpaid, and
(c) the drawer of such cheque fails to make 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, within
fifteen days of the receipt of the said notice.
Explanation: For the purpose of this section, "debt or other liability" means a legally
enforceable debt or other liability.
Thus Section 138 of N.I.Act, states that when a person issues a cheque to be encashed
and the cheque so issued is issued towards payment of a debt or liability and it is
returned unpaid for want of funds, the person issuing such a cheque shall be deemed
to have committed an offence. Section 138 presupposes three conditions for
prosecution of an offence they are:
a. Cheque shall be presented for payment within six months from the date of issue or
before expiry of its validity.
b. The holder shall issue notice demanding payment in writing to the drawer with in
one month of the receipt of information of the bounced cheque, and
c. The drawer inspite of the demand notice fails to make payment within one month of
the receipt of the notice.

If the above three conditions are satisfied the holder in due course gets the cause of
action to launch prosecution against the drawer of the bounced cheque.
How should the complaint for dishonour of cheque be lodged for the offence
punishable u/s.138 of the Negotiable Instrument Act?
Sec.142 of the Act envisages the method of lodging the complaint for the offence
punishable u/s.138 of the Negotiable Instrument Act.
Cognizance of offences:
As per this Section notwithstanding anything contained in the Code of Criminal
Procedure:
a. no court shall take cognizance of any offence punishable u/s.138 except upon a
complaint, in writing, made by the payee or, as the case may be, the holder in due
course of the cheque,
b. such complaint is made within one month of the date on which the cause of action
arises under clause (c) of the proviso to Sec.138,
[Provided that the cognizance of the complaint may be taken by the court after the
prescribed period, if the complainant satisfies the court that he had sufficient cause for
not making a complaint within such period]
c. no court inferior to that of a Metropolitan Magistrate or a Judicial Magistrate of the
First Class shall try any offence punishable u/s.138.
The cases filed under sec.138 of the Negotiable Instrument Act are tried summarily.
Thus for an offence to be made out and to set the criminal law in motion for the offence
punishable u/s.138 of the Negotiable Instrument Act One should lodge a complaint in
writing made within 30 days from the date of cause of action by the payee or holder in
due course has to file a complaint before the Jurisdictional court u/s.200 of Cr.P.C..
When the complaint is presented for the said offence the court has to follow the
procedure prescribed u/s.200 of Cr.P.C[i]. Which reads as follows:
If the complaint so filed is made within limitation (time) and preconditions prescribed
u/s.138 are complied with, court has to take cognizance of the offence and record
sworn statement, then process shall be issued to the accused. The Magistrate shall not
refer the complaint to the police for investigation u/s.156(3) of Cr.P.C. as the offence
u/s.138 of the Negotiable Instrument Act is non-cognizable offence[ii].

Presumption regarding the offence u/s.138 of Negotiable Instrument Act in


favour of holder:
When a complaint is file under Section 138 the court presumes that unless contrary is
proved, the holder of cheque received the notice and failed to make necessary payment
as referred to in Sec.138 for the discharge in whole or in part any legally valid debt or
liability. So, there is presumption that