Report No. 11

18. Certification of cheques.-

Two suggestions relating to cheques deserve particular mention. The first is that certification of cheques should be treated as equivalent to acceptance as in the case of bills. In the Bank of Baroda cases1 the Privy Council examined this question and held that certification of cheques as practiced in England and also by some banks in India did not amount to acceptance in the sense in which it was understood in the case of bills. Under the American Uniform Negotiable Instruments Law (sections 187 to 189), on the other hand, certification is treated as equivalent to acceptance, and the effect of certification is to discharge the drawer and all indorsers from liability thereon (section 188).

The point for consideration, therefore, is whether we should follow the American law, or leave the law as settled by the Privy Council unaltered. Some of the bankers whom we interviewed were not in favour of adopting the American law. We have been told that certification is not resorted to very frequently in India and that in cases where an assurance is needed that funds of the drawer are available with the Bank, the practice followed, as in Australia, is for the Bank to issue its own cheques. In the circumstances, we think no alteration of the law is required.

1. Bank of Baroda Ltd. v. Punjab National Bank Ltd., AIR 144 PC 58.