There is common misconception as to whether a 'Post-dated cheque' is a cheque in the eyes of law particularly under the NI Act and if a postdated cheque is legally not a cheque then when does it become a 'cheque'. Moreover, there is also confusion as to which date should be reckoned with for the purpose of invocation of Section 138 of the NI Act- the date of writing/handing over of cheque or the date inscribed on the cheque. However, the Apex Court has finally settled the issues & declared the law in this regard which is being discussed below.

Before deliberating on the subject, it would be relevant to reproduce Section 5 & 6 of The Negotiable Instruments Act, 1881, which read as under:

Section 5: "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 pay a certain sum of money only to, or to the order of, a certain person or to the bearer of the instrument.

Section 6 "Cheque":
A "cheque" is a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand and it includes the electronic image of a truncated cheque and a cheque in the electronic form.

Explanation I: For the purposes of this section, the expressions:

1. a cheque in the electronic form" means a cheque drawn in electronic form by using any computer resource and signed in a secure system with digital signature (with or without biometrics signature) and asymmetric crypto system or with electronic signature, as the case may be;
2. a truncated cheque means a cheque which is truncated during the course of a clearing cycle, either by the clearing house or by the bank whether paying or receiving payment, immediately on generation of an electronic image for transmission, substituting the further physical movement of the cheque in writing.

Explanation II: For the purposes of this section, the expression "clearing house" means the clearing house managed by the Reserve Bank of India or a clearing house recognised as such by the Reserve Bank of India.

Explanation III: For the purposes of this section, the expressions "asymmetric crypto system", "computer resource", "digital signature", "electronic form" and "electronic signature" shall have the same meanings respectively assigned to them in the Information Technology Act, 2000.

It is necessary to understand as to what is a post-dated cheque. In simple words, a post-dated cheque is a form of a cheque drawn with a future date written on it. In other words a post-dated cheque is one which is drawn with a date which is after the date on which cheque was written.

It would be trite to refer to the Apex Court judgment in the case of Anil Kumar Sawhney vs. Gulshan Rai, 1993 (4) SCC 424, wherein the Court observed thus:

12. Sections 5 and 6 of the Act define "Bill of Exchange" and "Cheque". A "Bill of Exchange" is a negotiable instrument in writing containing an instruction to a third party to pay a stated sum of money at a designated future date or on demand. A "cheque" on the other hand is a bill of exchange drawn on a bank by the holder of an account payable on demand. Thus a "cheque" under Section 6 of the Act is also a bill of exchange but it is drawn on a banker and is payable on demand. It is thus obvious that a bill of exchange even through drawn on a banker, if it is not payable on demand, it is not a cheque.

A "post-dated cheque" is only a bill of exchange when it is written or drawn, it becomes a "cheque" when it is payable on demand. The post-dated cheque is not payable till the date which is shown on the face of the said document. It will only become cheque on the date shown on it and prior to that it remains a bill of exchange under Section 5 of the Act. As a bill of exchange a post-dated cheque remains negotiable but it will not become a "cheque" till the date when it becomes "payable on demand".

13. It is clear from Section 19 that a "cheque" is an instrument which is payable on demand. A post-dated cheque, which is not payable on demand till a particular date, is not a cheque in the eyes of law till the date it becomes payable on demand."

It would be apropos to refer to Halsburys Laws of England, 4th Edition (Reissue) Volume 3(1), at page 143, wherein the procedure to be adopted by the bank in relation to post-dated cheque has been enumerated which reads thus:-

"Post-dated cheques are not invalid, but the banker should not pay such a cheque if presented before the date it bears. If, therefore, a cheque dated on a Sunday is presented on the previous business day, it should be returned with the answer `post dated. A post-dated cheque, however, if presented at or after its ostensible date, should be paid though the banker knows it to be post-dated, and even if it has been presented before the date and refused payment."

In Chalmers & Guest on Bills of Exchange, Cheques and Promissory Notes, 15th Edition, at page 74, the concept of `post- dated cheques has been explained as under:- Post-dated cheques. Cheques are often issued post-dated, that is to say, bearing a date later than that on which they are in fact issued. The purpose of issuing a post- dated cheque is to prevent the drawee banker from paying the cheque to the payee or a holder before the date written on the cheque.

It is clear that the instrument is a cheque once the date written on it arrives. But its status is unclear prior to that date. It is arguable that, between the date of its issue and the date written on the cheque, it is not payable on demand and so cannot be a cheque but an instrument of a different kind.

The view has been express that:
`so far as regards its practical effect, a post- dated cheque is the same thing as a bill of exchange at so many days date as intervene between the day of delivering the cheque and the date marked upon the cheque. It has also been stated that the effect of issuing a post-dated cheque is equivalent to giving a promissory note not payable until the date written on the cheque.

In Thomsons Dictionary of Banking, 12th Edition, at page 463 `post-dated has been defined as follows: Post-dated. A cheque which is dated subsequent to the actual date on which it is drawn, and which is issued before the date it bears, is called a post-dated cheque.

A post-dated cheque should not be paid before the date appearing thereon A cheque presented for payment before the date has arrived should be returned marked `post-dated'. F.E. Perry in The law and practice relating to banking: 1, at pages 137 & 138 has dealt with `post-dated cheque as under:-

"A cheque must not be postdated, that is, dated after the day on which it is presented for payment to the drawee branch. Postdated cheques present far more difficulties to the banker than antedated cheques: they are practical difficulties rather than legal ones.

But a cheque is generally postdated because the drawer does not expect to have the funds to meet it until that date arrives. It is a mandate to the banker to the effect that it should not be paid before that date arrives."

It would be beneficial to refer to a 3 member larger bench in Ashok Yeshwant Badave vs Surendra Madhavrao Nighojakar & Anr. AIR 2001 SC 1315, wherein the Apex Court approving the dictum of Anil Kumar Sawhney (supra) observed that a postdated cheque for purpose of clause (a) of the provision to section 138 has to be considered to have been drawn on the date it bears.

On the basis of Sections 5 and 6 of the Act, it was observed that "post-dated cheque is only a bill of exchange when it is written or drawn, it becomes a cheque when it is payable on demand. The post-dated cheque is not payable till the date which is shown on the face of the document. It will only become cheque on the date shown on it and prior to that it remains a bill of exchange under Section 5 of the Act. As a bill of exchange a post-dated cheque remains negotiable but it will not become a cheque till the date when it becomes payable on demand.

It would be appropriate to refer to the Apex Court judgment in Jiwanlal Achariya vs. Rameshwarlal Agarwalla, AIR 1967 SC 1118 wherein the Court held as under:

"From a bare perusal of Sections 5 & 6 of the Act it would appear that bill of exchange is a negotiable instrument in writing containing an instruction to a third party to pay a stated sum of money at a designated future date or on demand. On the other hand, a cheque is a bill of exchange drawn on a bank by the holder of an account payable on demand. Under Section 6 of the Act a cheque is also a bill of exchange but it is drawn on a banker and payable on demand.

A bill of exchange even though drawn on a banker, if it is not payable on demand, it is not a cheque. A `post-dated cheque is not payable till the date which is shown thereon arrives and will become cheque on the said date and prior to that date the same remains bill of exchange.

For prosecuting a person for an offence under Section 138 of the Act, it is inevitable that the cheque is presented to the banker within a period of six months from the date on which it is drawn or within the period of its validity whichever is earlier. When a post-dated cheque is written or drawn, it is only a bill of exchange and so long the same remains a bill of exchange, the provisions of Section 138 are not applicable to the said instrument.

The post-dated cheque becomes a cheque within the meaning of Section 138 of the Act on the date which is written thereon and the 6 months period has to be reckoned for the purposes of proviso (a) to Section 138 of the Act from the said date."

It would be befitting to refer to Madras High Court judgment in N. Sivalingam And Another vs A.V. Chandraiyer [1996] 86 COMPCAS 167(MAD), wherein the Court observed thus:

"It is the cheque drawn which has to be presented to the bank within the period specified therein. When a post-dated cheque is written or drawn, it is only a bill of exchange and as such the provisions of section 138(a) are not applicable to the said instrument. The post-dated cheque becomes a cheque under the Act on the date which is written on the said cheque and the six month period has to be reckoned for the purposes of section 138(a) from the said date. One of the main Ingredients of the offence under section 138 of the Act is the return of the cheque by the bank unpaid.

Till the time the cheque is returned by the bank unpaid, no offence under section 138 is made out. A post-dated cheque cannot be presented before the bank, and as such the question of its retum would not arise. It is only when the post-dated cheque becomes a "cheque", with effect from the date shown on the face of the said cheque, that the provisions of section 138 come into play.

The net result is that a post-dated cheque remains a bill of exchange till the date written on it. With effect from the date shown on the face of the sale cheque it becomes a "cheque" under the Act and the provisions of section 138(a) would squarely be attracted. In the present case, the post-dated cheques were drawn on March 12, 1990, but they became 'cheques' only on April 22, 1990, and April 28, 1990, the dates shown therein.

The period of six months, therefore, has to be reckoned from the date mentioned on the face of the cheques. As the apex court has pointed out, section 138 has to be construed with reference to context. If the object of bringing section 138 of the Act on the statute has to be fulfilled, then the only interpretation which can be give to clause (a) of the proviso to section 138 of the Act is that a post-dated cheque shall be deemed to have been drawn on the date it bears."

Summing up, it transpires that a postdated cheque will not be honoured by the Bank if presented before the date mentioned on it. Since it is not paid on demand, it is certainly not a cheque. Therefore, until the date written on it arrives, it has no effect whatsoever.

Thus, if a post-dated cheque is dishonoured with a remark that it is post-dated, it does not fall within the ambit of Section 138 of the NI Act as a post-dated cheque is not payable till the date which is shown on the face of the said document and it will only become cheque on the date shown on it and prior to that it remains a bill of exchange under Section 5 of the NI Act.

Written By: Inder Chand Jain
Ph no: 8279945021, Email: [email protected]