Article by Gagan Kumar, Runjita Das and Vidushi Khaitan
The Negotiable Instruments Act, 1881 ("the Act") was enacted to characterize and define the law relating to authoritative records like Promissory Notes, Bills of Exchange and Cheques. Over the years, the Act has undergone amendments to deal with the changing times, keeping in view the common goal of rapid disposal of cases identifying with the offence of dishonour of cheques. However, the pendency ratio of cheque dishonour cases still remains a critical issue and adversely affects the cash flows of businesses particularly Small & Medium sized Enterprises ("SMEs").
It is observed that one of the main reasons that plagues the system, roots down to the malafide strategies of corrupt drawers of dishonoured cheques towards evading and abusing the process of law, eventually harming the innocent payees of the dishonoured cheques.
With a view to curb such practices, the Lok Sabha passed Negotiable Instruments (Amendment) Bill, 2017 on July 23, 2018, Rajya Sabya passed the Bill on July 26, 2018 and subsequently the Negotiable Instruments (Amendment) Act, 2018 ("Amendment Act") was notified on August 02, 2018. The amended provisions introduced are likely to contribute towards reducing the number of cheque bounce cases pending in the courts. This will provide immediate relief to the payees of dishonoured cheques, the disposal of which consumes considerable time and resources.
KEY FEATURES OF THE AMENDMENT ACT:
- Section 143A has been inserted which essentially empowers the court trying the offence under Section 138 of the Act, to direct the drawer of the cheque to pay interim compensation to the Payee in situations of a summary trial or summons case wherein the drawer pleads to be "not guilty". This new provision seeks to cap interim compensation to 20% of the cheque amount.
- Another provision introduced as Section 148 specifies that in case the drawer files an appeal against his/her conviction, the Appellate court has the power to direct the drawer to deposit a minimum amount of 20% of the fine or compensation that was awarded by the Trial court. The Appellate Court may direct to release the amount deposited by the appellant to the complainant at any time during the pendency of the appeal. This amount shall be in addition to the compensation paid at the trial stage.
- The interim compensation at the trial as well as the deposit amount at the appellate stage (as the case may be) shall be paid within 60 days from the date of the order by the court trying the offence or the appeal. The concerned court may further extend this period by an additional time of 30 days' subject to the sufficient reasons being shown.
- In case of acquittal of the drawer/ appellant by the Trial Court or the Appellate Court, (as the case may be) the payee/complainant shall be directed to repay the interim compensation or amount deposited (as maybe applicable), to the drawer/appellant along with such interest as may be fixed by Reserve Bank of India at the beginning of the relevant financial year. This amount shall be repaid within 60 days of the court's order and this period may be further extended by another 30 days' subject to sufficient reasons being shown.
The present Amendment is aimed to reduce the pendency ratio of cheque bounce cases and appears to be a step taken towards improvement in the current scenario. The amended provisions could pave the way towards enhancing the trade and commerce industry and allowing various lending institutions to promote and stimulate finances in the economy. It is also likely to strengthen the credibility of issued cheques which will largely contribute towards building business relations.
At the same time, it cannot be ignored that although the amended provisions are likely to bring in better efficacy and credibility of cheques drawn, yet the offence is still being categorized as a bailable offence with a maximum imprisonment of 2 years, if convicted. This, in our opinion may call for further introspection and more stringent provisions.
However, the essence of the amended provisions which is drawn towards faster disposal may come out as a boon to the present system. Although the applicability of the amended provisions - whether prospective or retrospective, is not categorically specified, yet it appears that the nature of the same are more procedural in nature, considering the fact that the existing rights, obligations, duties of either party existing at the time of commission of offence, is not altered or effected vide the amended provisions. With the settled position that procedural laws are retrospective in nature unless otherwise intended or specified, the amended provisions, which essentially intends to boost the present manner of implementation of the existing rights and duties of the parties at the time of commission of offence, would also have retrospective application. Considering such a view, the pending litigations in addition to the future ones may also get an impetus and a wave of relief to the genuine party.
To sum up, we can say that although the Amendment Act is not without challenges yet it largely appears to cater to its objective of expediting the disposal of cases and also bringing wave of relief to the genuine holder of bounced cheques.
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