India: Approval of Bill to amend The Negotiable Instrument Act, 1881

December 20, 2017


Introduction –

The Union Cabinet recently gave its approval for a Bill to amend the Negotiable Instruments Act, 1881. The proposed amendments to the Negotiable Instruments Act, 1881 (hereinafter referred to as the “NI Act”) focused on clarifying the jurisdiction related issues for filing cases for offence committed under
Section 138 of the Act. [1]

Need for amendment

Presently, various financial institutions and industry associations have expressed concerns and difficulties due to the legal interpretation by the Supreme Court wherein they stated that the place of jurisdiction for filing cases will be the place of the drawers’ bank.[2]

The amendment will provide clarity on jurisdictional issues relating to cases concerning cheque bouncing, due to which many cases are pending before the Courts. The amendment is meant to increase the credibility of cheques as a financial instrument. This would further be in the interest of the complainants while ensuring fair trial.[3]

Features of the Amendment

One of the main features of the amendment is to provide for interim compensation to the payee of a cheque, both at the trial stage and at the appellate stage. As per the amendment, the Courts will now be at liberty to order interim compensation to the payee of a cheque, during the trial stage itself. If the drawer is acquitted, the payee shall repay the amount paid as interim compensation with interest upon direction from the Court. Further, Appellate Courts will also be enabled to order the Appellant to deposit a part of the compensation awarded by the trial court at the time of filing of the appeal.

The Amendment is also meant to boost trade and commerce in general and allow the lending institution, including banks, to continue to extend financing of the economy, without the apprehension of loan default on account of bouncing of a cheque.





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