INTRODUCTION:

The section 138 of the Negotiable Instruments Act, 1881, deals with the offence pertaining to dishonor of Cheque for insufficiency, etc, of funds in the drawers account on which the cheque is drawn for the purpose of discharge of any legally enforceable debt or other liability. This section prescribes for penalties in case of dishonor of Cheques. The object of the Act is to encourage the usage of cheque and enhance the credibility of the instrument so that the flow of normal business transactions and settlement of liabilities remain unobstructed.1

The parliament of India had given its approval on 13.6.2015 for the proposal to promulgate the Negotiable Instruments (amendment) Ordinance, 2015; and the President of India has promulgated the same. The said amendments are sought to be brought in the Act vide this amendment Bill, because of Court Order stating that – "cases against those having defaulted on their Cheque payments could only be filed in Courts under which jurisdiction the bank Account of the accused fell." Therefore the Finance Minister Mr. Arun Jaitley said while introducing the Bill that "to address the difficulties faced by the payee or the lender of the money in filing the case under section 138 of NI Act, because of which a large number of cases are stuck, the jurisdiction for offence has been clearly defined keeping in view the interest of complainants".

There are five separate actions that lead to Cheque Bouncing Case. These are: (1) Drawing of the Cheque, (2) Presentation of the Cheque to the bank, (3) Returning of the Cheque unpaid by the drawee bank, (4) Giving notice in writing to the drawer of the Cheque demanding payment of the amount within 30 days of the dishonoring of the Cheque, and (5) Failure of the drawer to make payment within 15 days of the receipt of the notice.2

After the Bill is passed the Cheque Bouncing Cases can only be filed in a court under whose jurisdiction the Bank Branch of the payee where the Cheque is presented, falls. While approving the amendment, the government had said it is aimed at fast tracking the resolution of Cheque bounce cases while removing ambiguities' on jurisdictional issues.

DESCRIPTION OF THE AMENDMENT BILL:

The ordinance seeks to amend the NI Act and overturn a judgment issued by a three judge Bench of the Supreme Court in last August in 2014 in the case of Dasrath Rup Singh Rathod Vs State of Maharashtra3 and ruled that "the place situs or venue of judicial inquiry and Trial of the offence must logically be restricted to where the drawee Bank is located." Supreme Court further said "We clarify that the place of the issuance or the delivery of the statutory notice or where the complainant chooses to present the Cheque for encashment by his Bank are not relevant for purposes of territorial jurisdiction of the complaints". This three member Bench of the Supreme court had actually overturned an earlier apex court ruling – the so called Bhaskaran Ruling delivered in 1999, which allowed the victims of 138 NI Act to file cases in a magistrate's court in any court having jurisdiction over the local areas where the five different actions took place". While doing so the Supreme Court said "the conclusion in Bhaskaran was influenced in large measure by curial compassion towards the unpaid payee/holder, whereas with the passage of two decades the manipulative abuse of territorial jurisdiction has become a recurring and piquant factor".

Therefore the proposed amendment is definitely going to bring in some relief to the victims. The present Ordinance proposes to inserts a new Sub Clause to the existing section 142 (sub-clause (2)), which reads as follows:

"(2) The offence under section 138 shall be inquired into and tried only by a court within whose local jurisdiction the Bank Branch of the payee, where the payee presents the Cheque for payment, is situated"4.

The Bill also introduces a new section (142A) in the NI Act, which reads as follows:

" (1) Notwithstanding anything contained in the code of Criminal Procedure, 1973 or any other judgment, decree, order or directions of any court, all cases arising out of section 138 which were pending in any court, whether filed before it, before the commencement of the Negotiable Instruments (amendment) Act, 2015, shall be transferred to the court having jurisdiction under sub section (2) of section 142 of sub section(1), where the payee or the holder in due course, as the case may be, has filed a complaint against the drawer of a cheque in the court having jurisdiction under subsection (2) of section 142or the case has been transferred to that court under sub section (1), 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.

(3) If, on the date of the commencement of the Negotiable instruments (amendment) Act, 2015, more than one prosecution filed by the same person against the same drawer of the Cheques is pending before different courts, upon the said fact having been brought to the notice of the court, such court shall transfer the case to the court having jurisdiction under sub section 142(2) before which the first case was filed as if that sub-section had been in force at all material times."5

In order to create a suitable legal frame work for determination of the place of jurisdiction for trying cases of dishonor of Cheques under section 138 of NI Act, this new amendment Bill has been brought. The objective of the new amendments is to ensure that a fair trial is conducted keeping in view the interest of the complainant by clarifying the territorial jurisdiction for trying the cases for dishonor of Cheques.

The clarity on the jurisdictional issue for trying the cases of Cheque Bouncing would increase the credibility of the Cheque as a financial instrument. This would help the trade and commerce in general and allow the lending Institution, including banks, to continue to extend financing to the economy, without the apprehension of the loan default on account of bouncing of a cheque.6

This decision of the Union Cabinet has been widely welcomed throughout the country, and especially by the stake holders including industry associations and financial institutions.

In the absence of these new proposed provisions, the litigants were harassed for no cause, as they had to travel several times to a court in a different city to pursue the case adding to the cost of litigation. Sometimes there arose ridiculous situation where the litigants had to spend half of the Cheque amount or more than that on travel and hotel bills etc, in order to face the litigation and to get their own due amount.

CONCLUSION

Keeping the fact in view that about 21 Lac Cheque Bounce cases are pending in Indian Courts, the new law should help to consolidate the cases and quicken the judicial process. It will also be proved helpful for banking institutions which are battling the menace of bad loans. On the other hand, there arose some protest also against the new bill, giving their arguments that the new proposed laws in the NI Act could be used by the Corporate to harass the common man.

Answering the protest and questions arose to the new amendment bill, the Minister of State for finance - Mr. Jayant Sinha, insisted that it would boost the integrity of financial system and not lead to the harassment of the common man. The Hon'ble minister has further stated that "we need this law to strengthen the financial system. It will beef up the integrity of the system. We are moving towards a cashless society and we need this".7

Footnotes

1. http://pib.nic.in/newsite/PrintRelease.aspx?relid=118533

2 http://www.telegraphindia.com/1150611/jsp/frontpage/story_25118.jsp#.VY5dhBuqqko

3 2014(3)ACR2914,

4 http://www.prsindia.org/uploads/media/Negotiable%20instrument/Negotiable%20instruments%20bill-.pdf

5 http://www.prsindia.org/uploads/media/Negotiable%20instrument/Negotiable%20instruments%20bill-.pdf

6 http://pib.nic.in/newsite/PrintRelease.aspx?relid=118533

7 placement.freshersworld.com/power.../Current-Affairs-May-2015

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