Proposed Payment System Act 2015: A critical analysis of cheque

Bangladesh Bank circulated a notice published in 'Daily Prothom Alo', in April, 2015 asking for general recommendations that it is going to enact an Act on payment system entitled 'Payment System Act 2015.' The draft of this Act as it stands now, revises the administrative regulations of Bangladesh Bank regarding payment system in the country. 

The proposed draft includes the definitions of payment instruments including different forms of cheques. Generally a cheque is paper based under the traditional banking system. At present under the e-banking systems different model of cheques including electronic form of cheques (e- cheques), electronic image of cheques and several cards are in practice in several countries. In Bangladesh machine-readable magnetic ink character recognition (MICR) cheques are introduced in online banking and some banks started internet banking by using computer or other devices connected with internet under the banner of e-banking. Starting e-banking as per international standard inside the country needs comprehensive law and the proposed 'Payment System Act 2015' is a step in this regard. 

At present the only statutory law relating to cheque is the Negotiable Instrument Act, 1881 (NI Act) in Bangladesh. Section 6 of the said Act defines a cheque  that it is a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand.

Section 2 in the proposed draft of the Payment System Act 2015 is a definition section. It includes different modern definitions of cheque in different sub-sections of section 2, for example, section 2(5) “Cheque” , Section 2 (6) "Cheque in the electronic form" , Section 2(13) “Cheque Image”, Section 2 (18) “Electronic presentment of cheques“, Section 2 (52) "Truncated cheque". The new law acknowledges different dimension of cheques but these are not well placed systematically which may create anomaly.  Definition of several types of cheques may be setup in a single sub-section. That may be as Cheque: (i) Cheque , (ii) Cheque in the electronic form, (iii) Truncated cheque. The sub-sections of section 2 of the proposed draft are alphabetically arranged hence if 'Truncated cheque' were 'Cheque Truncated' then cheque related provisions might be placed aside.

It is written in Section 29 of the proposed Act that, (1) In order to ensure enforceability of cheques truncation and electronic presentment of cheques, the appropriate provisions of Negotiable Instruments Act, 1881 shall apply.  (2) Bangladesh Bank may issue additional instructions from time to time to specifically address the processing of cheques in electronic form, any such instruction will take precedence over the provisions of Negotiable Instruments Act 1881. Although the proposed Act acknowledged the NI Act but NI Act is not improved accordingly and no amendment so far has been made yet. Even it is not found that any initiative is taken in this regard.  

Part nine, section 30 of the proposed draft includes the provision,

(1)Enforceability and evidentiary value of electronic transfers and records shall be granted according to relevant provisions of the Information and Communication Technology Act, 2006 and the Bankers' Book Evidence Act 1891. (2) In implementation of the provisions of this Act, and in accordance with any other relevant laws on electronic transactions, Bangladesh Bank shall promulgate regulations, instructions or other relevant measures within its powers to cover specific issues on payment orders and money transfers executed by electronic messages, including, when deemed relevant, protection of users of electronic payment instruments. Such measures shall complement those of this Act and shall not conflict thereof. Subsequently Communication Technology Act, 2006 and the Bankers' Book Evidence Act 1891 are interrelated in the area of banking. And the proposed Act recognises the laws but no similar change is made on the original part.

Cheque defined in Negotiable Instruments Act, 1881 includes only paper based cheques. If cheque in the electronic form, cheque Image, electronic presentment of cheques, truncated cheque, is introduced in the country, it must  amend the existing related laws, that is,  Negotiable Instruments Act, 1881, Communication Technology Act, 2006 and the Bankers' Book Evidence Act 1891.  It would be better if the country had a single or consolidated law on cheque or other payment system to reduce anomaly. The consolidated form of Bangladesh Labour Act 2006 may be an example here. 

THE WRITER IS AN ASSOCIATE PROFESSOR, DEPARTMENT OF LAW, RAJSHAHI UNIVERSITY.