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Cabinet approved the promulgation of Negotiable Instruments Act

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The Union Cabinet chaired by Prime Minister Narendra Modi, approved a proposal to promulgate the Negotiable Instruments (Amendment) Ordinance, 2015 for the second time to make prosecution easier in cheque bounce cases by allowing filing of cases where it is presented for receiving payments.

The proposed amendments to the Negotiable Instruments Act, 1881 are focused on clarifying the jurisdiction related issues for filing cases for offence in case of cheques committed under section 138 of the act.

Cabinet approved the promulgation of Negotiable Instruments Act

Background:

Negotiable Instruments (Amendment) Act, 2015 was passed in the Lok Sabha in May, seeking to overturn a Supreme Court decision of 2014 which said that the case has to be initiated where the cheque – issuing branch was located. However, it could not be approved by Rajya Sabha, necessitating an ordinance.

Key Facts about the Ordinance:

  • As per the ordinance the jurisdiction for filing of cheque dishonour cases will only be a court within whose local jurisdiction the bank branch of the payee where he delivers the cheque for payment is located.
  • Further, where a complaint has been filed against the drawer of a cheque in the court having jurisdiction under the new scheme of jurisdiction, all subsequent complaints arising out of section 138 against the same drawer shall be filed before the same court, irrespective of whether those cheques were presented for payment within the territorial jurisdiction of that court or not.
  • It has also been provided that if there are more than one prosecution cases against the same drawer of cheques before different courts, the court shall transfer the case to the court having jurisdiction.

 Significance:

  • First of all the move is likely to benefit 18 lakh people across the country.
  • Furthermore, this would help trade and commerce in general and allow the lending institution, including banks, to continue to extend financing to the economy, without the apprehension of loan default on account of bouncing of a cheque.
  • The main objective is to ensure that a fair trial is conducted keeping in view the interests of the complainant by clarifying the territorial jurisdiction for trying the cases for dishonour of cheques and to encourage the usage of cheques and enhancing the credibility of the instrument so that the normal business transactions and settlement of liabilities can be ensured.

What is Negotiable Instruments (NI) Act?

It’s an Act to define and amend the law relating to Promissory Notes, Bills of Exchange and Cheques. Section 138 of the NI Act deals with the offence pertaining to dishonour of cheque for insufficiency etc, of funds in the drawer’s account on which the cheque is drawn for the discharge of any legally enforceable debt or other liability.