The Union Cabinet, chaired by the Prime Minister Shri Narendra
Modi, has given its approval for the proposal to promulgate the
Negotiable Instruments (Amendment) Ordinance, 2015.
The proposed amendments to the Negotiable Instruments Act, 1881
("The NI Act") are focused on clarifying the jurisdiction
related issues for filing cases for offence committed under section
138 of the NI Act.
The clarity on jurisdictional issues for trying
cases of cheque bouncing would increase the credibility of the
cheque as a financial instrument. 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.
view of the urgency to create a suitable legal framework for
determination of the place of jurisdiction for trying cases of
dishonour of cheques under section 138 of the NI Act, the
Government has decided to amend the law through the Negotiable
instruments (Amendment) Ordinance, 2015.
The 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. The Ordinance is similar to the Bill in the sense that the
substantive principle for determination of the jurisdiction of
cases under section 138 of the NI Act remains the same, except that
that two distinct situations of payment of cheque (i) by submitting
the same for collection through an account or (ii) payment of a
cheque otherwise through an account, that is, when cheques are
presented across the counter of any branch of drawee bank for
payment, are covered under the Ordinance.
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. The object of
the NI Act is 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.
Various financial institutions and industry associations have
expressed difficulties, arising out of the recent legal
interpretation of the place of jurisdiction for filing cases under
Section 138 to be the place of drawers' bank by the Supreme
Court. To address the difficulties faced by the payee or the lender
of the money in filing the cases under Section 138 of the NI Act,
because of which, large number of cases were stuck, the
jurisdiction for offence under Section 138 has been proposed to be
clearly defined. Accordingly, the Negotiable Instruments
(Amendment) Bill, 2015 ("the Bill") in Parliament was
introduced in Lok Sabha on 6th May, 2015 and considered and passed
by Lok Sabha on 13th May, 2015. However, since the Rajya Sabha was
adjourned sine die on 13th May, 2015, the Bill could not be
discussed and passed by that House and the Bill could not be
The Bill provides for filing of cases only by a court within
whose local jurisdiction the bank branch of the payee, where the
payee delivers the cheque for payment is situated. 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.
Further, it has been provided that if more than one prosecution
is filed against the same drawer of cheques before different
courts, upon this fact having been brought to the notice of the
court, the court shall transfer the case to the court having
jurisdiction as per the new scheme of jurisdiction.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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