MADURAI: The Madurai Bench of Madras High Court on Thursday issued a notice to the Reserve Bank of India (RBI) and Union Finance Ministry on a Public Interest Litigation (PIL) petition filed against making the Positive Pay System mandatory in India.
Challenging a notification by the RBI in September last year, the litigant K Krishna, who is an advocate from Madurai, claimed Positive Pay System defeats the purpose of the Negotiable Instruments Act, 1881.
Krishna stated the Positive Pay System is a process of reconfirming key details of large value cheques.
“Under this process, the issuer of the cheque will submit certain details of that cheque (such as date, name of the beneficiary or payee, cheque amount, etc) to the drawee bank electronically through channels such as SMS, mobile app, internet banking, ATM, etc.
The details will then be cross-checked with the presented cheque by Cheque Truncation System,” he explained. But because of the new notification, the system, which was optional, has now been made mandatory by all banks for payments above Rs 50,000, Krishna stated.
Though the system’s objective is to prevent cheque frauds, Krishna feared this would lead to more frauds.
“It would be very easy for fraudulent persons to issue the cheque and then submit wrong details through Positive Pay System so that the payee would not receive the amount,” he said and requested the court to quash RBI’s notification. A Bench of Justices M Duraiswamy and K Murali Shankar, which heard the plea, issued the notice and adjourned the case hearing for two months.