Reconceptualising the Negotiable Instruments Act, 1881 in the Era of Digital Payments: A Doctrinal and Regulatory Analysis of India’s Evolving Payment Ecosystem

Abstract

In the Indian economy, financial transactions including checks, “bills of exchange, and promissory notes are governed under the Negotiable Instruments Act, 1881”. Issues including faith, negotiability, and legality in a paper-based bank system were taken into consideration when this Act was passed. However, a lot has changed since the introduction of the digital bank system, which includes RTGS, NEFT, and UPI.

The current study aims at determining whether the Act is still adequate in regulating present-day digital payment tools. The current study will also analyse the doctrinal structure by using legislation, court rulings, and legal scholarship on the issue. In particular, it will look at advancements such as e-cheques and the cheque truncation system. However, the key concepts of negotiability, consideration, holder in due course, and legality still form the basis of financial dealings regardless of technology.

The paper identifies that although the Act is still relevant in maintaining financial discipline, it is insufficient in solving problems of the failure of digital payment mechanism, whereas there are provisions for solving the problem of “cheque bounce under section 138 of the Act”. The research concludes that there should be a legal framework comprising negotiable instruments law and digital payments law.