ITA-2000 and Negotiable Instruments Act

The Information Technology Act 2000 (ITA-2000) extends the applicability of all laws in India to "Electronic Documents", excepting the following exceptions.

1.Negotiable Instruments
3.Power of Attorney Documents
4.Trust Deeds
5.Immovable Property Documents.

The Act says (Sec 1.4) that "Nothing in this Act shall apply to a Negotiable Instrument as defined in section 13 of the Negotiable Instruments Act 1881. etc"

The intention of the law makers is clear that the "Paper based system" that is now prevailing for Negotiable Instruments need to be continued.

However, we must recognize that while the ITA-2000 bars the validity of "Drawing of a Negotiable Instrument in Electronic form", contracts where Negotiable Instruments form  part of consideration can be drawn on the digital media.

One of the areas where Bankers are to be careful is in handling "Stop Payment of Cheques". It is an established practice in Banking law that a "Stop Payment Instruction" can be communicated by any reasonable means keeping in view the "Expediency". Also, in handling cases such as "payment of instruments on which a notice of defective title is subsisting", a banker is expected to act with the "Diligence of a Prudent Person". Otherwise, he will be held "Negligent".

In the Digital era,  use of e-mails is becoming as common as telephones, and  many Banks are prepared to open and run Accounts on the Internet, prima-facie recognizing a "Banker-Customer Relation ship in the Cyber Society". Any notice of "Loss of Draft" or "Stop Payment of Cheque" through an e-mail will therefore be deemed as sufficient notice to put the Banker on alert. Just as a stop payment instruction received over phone would prompt a Diligent banker to "Take back the Cheque" any time before cash is delivered to the payee across the counter, an e-mail (though not digitally signed) in which stop payment instruction is issued by the client, has to be acted upon.

Interesting  practical questions that arise in this regard are, 

Which e-mail address is attributable to the manager of the paying branch?.

Is it the e-mail address of the HO, the branch or the personal address of the Manager? 

If so what are the effects of the manager not opening the e-mail box? 

Will an "E-mail" policy for the branch duly documented would be of any help?

The subject is open for debate.

P.S: I hear a voice there of a harassed Bank Manager, saying 

"Hey- Don't complicate our life yar! Stop extending all Meta Society Laws to the Digital Society or Vice-Versa. Keep them different." 


Please Send Your comments if any