Negotiable Instruments Act: Cabinet approves amendment to provide interim compensation

The move would help in augmenting the trade and commerce, notably the MSME sector, and further order to elevate the credibility of the cheque as a financial statement.

The amendment seeks to provide for interim compensation to the payee of a cheque, both at the trial stage and at the appellate stage, and further allows a court to order interim compensation to the payee of a cheque, a part of the amount at the trial stage itself.

And furthermore, if the drawer is acquitted, the court may direct the payee to repay the amount paid as interim compensation with interest. Similarly, the appellate courts will be enabled to order the appellant to deposit a part of the compensation awarded by the trial court at the time of filing an appeal.

The move follows from the representations from the public and the trading community regarding the injustice caused to payees as a result of pendency of cheque dishonour cases.

STATEMENT OF OBJECTS AND REASONS

1. The Negotiable Instruments Act, 1881 (the Act) was enacted to define and amend the law relating to Promissory Notes, Bills of Exchange and Cheques. The said Act has been amended from time to time so as to provide, inter alia, speedy disposal of cases relating to the offence of dishonour of cheques. However, the Central Government has been receiving several representations from the public including trading community relating to pendency of cheque dishonour cases. This is because of delay tactics of unscrupulous drawers of dishonoured cheques due to easy filing of appeals and obtaining stay on proceedings. As a result of this, injustice is caused to the payee of a dishonoured cheque who has to spend considerable time and resources in court proceedings to realise the value of the cheque. Such delays compromise the sanctity of cheque transactions.

2. It is proposed to amend the said Act with a view to address the issue of undue delay in final resolution of cheque dishonour cases so as to provide relief to payees of dishonoured cheques and to discourage frivolous and unnecessary litigation which would save time and money. The proposed amendments will strengthen the credibility of cheques and help trade and commerce in general by allowing lending institutions, including banks, to continue to extend financing to the productive sectors of the economy.

3. It is, therefore, proposed to introduce the Negotiable Instruments (Amendment) Bill, 2017 to provide, inter alia, for the following, namely:—

(i) to insert a new Section 143A in the said Act to provide that the Court trying an offence under Section 138 may order the drawer of the cheque to pay interim compensation to the complainant, in a summary trial or a summons case, where he pleads not guilty to the accusation made in the complaint; and in any other case, upon framing of charge. The interim compensation so payable shall be such sum not exceeding twenty per cent. of the amount of the cheque; and
(ii) to insert a new Section 148 in the said Act so as to provide that in an appeal by the drawer against conviction under Section 138, the Appellate Court may order the appellant to deposit such sum which shall be a minimum of twenty per cent. of the fine or compensation awarded by the trial court.

4. The Bill seeks to achieve the above objectives.

Cabinet

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