Cheque Returned for “Positive Pay Order”: Does Section 138 Still Apply?
With banks implementing the Positive Pay mechanism pursuant to RBI directions , cheque return memos increasingly record reasons such as “Positive Pay not registered” or “Positive Pay mismatch” . This has given rise to a new question: If a cheque is returned due to Positive Pay non-compliance, does Section 138 of the Negotiable Instruments Act, 1881 still apply? Inthe author's view, the answer is yes — since the dishonour is still attributable to the drawer . This post examines the issue through statutory interpretation and settled Supreme Court jurisprudence. Understanding the Positive Pay Mechanism: The Positive Pay system requires the drawer of a cheque to pre-register key cheque particulars —such as cheque number, date, amount, and payee name—with the bank before presentation. If the details are: Not registered, or Incorrectly registered, the cheque may be returned unpaid even if sufficient funds are available . The critical point is: Positive Pay co...