Amendments to the Negotiable Instruments Act

The Negotiable Instruments Act, 1881 (“Act“) was implemented with the intention of amending the law related to promissory notes, bills of exchange and cheques. The Act has been amended time and again to ensure and enhance the trust in negotiable instruments. In furtherance to this, an amendment to the Act has been passed by introducing the Negotiable Instruments (Amendment) Bill, 2017 which was given the Presidential assent on the 2nd of August 2018, making the Negotiable Instruments (Amendment) Act, 2018 (“Amendment Act“) come into existence. In furtherance to the assent, the Amendment Act has become effective from the 1st of September 2018, after being notified in the official gazette.

Introduction of Sections 143A and 148

The Amendment Act contains two significant changes – the introduction of Section 143A and Section 148. These sections provide interim compensation during the pendency of the criminal complaint and the criminal appeal.

Section 143A of the Amendment Act

In accordance with section 143A of the Amendment Act, any court while trying an offence for dishonour of a cheque can now direct the drawer, who is the issuer of the cheque, to pay interim compensation to the complainant. This amendment has been made in line with Section 138 of the Act which refers to the bouncing of cheque due to insufficiency of funds in the account or the amount as mentioned in the cheque exceeding the amount arranged to be paid from the bank account.

Under this section of the Amendment Act, the court now has the authority to direct such interim compensation in circumstances of a summary trial or a summons case wherein the drawer pleads to be not guilty and upon the framing of any other charge. The amount of compensation payable cannot exceed 20% of the amount as stated in the cheque. This amount has to be paid within a stipulated time period of 60 days from the date of the order passed by the court, or further within the extended period of 30 days, as may be directed by the court on showing sufficient cause for the delay caused.

On acquittal of the drawer, the court will consequentially direct the complainant to pay the drawer the prescribed amount along with the interest. The interest will be levied at the rate which was prevalent at the beginning of the financial year. As per the section such recovery of the payment has to be made within a time period of 60 days in furtherance to a delay of 30 days.

It has to be further noted that the final compensation if awarded to the complainant on the disposal of the case, will be after the deduction of the interim compensation.

Section 148 of the Amendment Act

The protection that has been provided in Section143A of the Amendment Act extends during the period of appeal as well. Section 148 of the Amendment Act provides that in the event of the conviction of the drawer of the cheque, if the drawer proceeds to file an appeal, the appellant court has the power to order the drawer of a cheque to deposit an amount. This deposited amount has to be a minimum of 20% of the fine or compensation awarded by the Magistrate Court in the appeal preferred against his/her conviction. This amount can be ordered anytime during the pendency of the appeal. The procedure relating to payment of the above stated fine and refund of the same if the appeal succeeds, is similar to what has been laid down in Section 143A of the Amendment Act.

Significance of the Amendment Act

Though the Act has been amended various times to help with the speedy disposal of cases relating to the offence of dishonour of cheques, there has been dissatisfaction regarding the pendency of such cases.This delay leads to erosion of the faith of the public at large in the usage of cheques as a mode of instrument for their day to day transactions. Moreover, it is an injustice to the payee who has to invest time and money in the court proceedings in order to realise the value of the cheque. To overcome this, the above stated clauses have been passed, which provide temporary relief to the aggrieved until a final verdict has been passed in the court, thus discouraging frivolous litigation. The statement of objects and reasons of the Negotiable Instruments (Amendment) Bill, 2017 states that the amendment had been introduced “with a view to addressing 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”.