Cabinet Approves Ordinance to amend Negotiable Instruments Act

According to the Official release, “the cabinet has given its approval for the proposal to promulgate the Negotiable Instruments (Amendment) Ordinance, 2015”. Thereby, Cabinet approved an ordinance to amend the Negotiable Instruments Act, which provides for filing of cheque bounce cases in place where the cheque was issued, a move that will benefit many people.

It said that the proposed amendments to the Negotiable Instruments Act, 1881 (“The NI Act”) were focused on clarifying the jurisdiction related issues for filing cases for offence committed under section 138 of the Act. That, “the clarification of jurisdictional issues may be desirable as this would be in the interests of the complainant and would also ensure a fair trial”.

This would help the trade and commerce in general and allow the lending institution, including banks, to continue to extend finance to the economy, without the apprehension of the loan default on account of bouncing of a cheque.

That, various financial institutions and industry associations have expressed difficulties due to recent legal interpretation by the Supreme Court of the place of jurisdiction for filing cases to be the place of drawers’ bank. To address the difficulties faced by the payee or the lender of the money in filing the cases because of which, large number of cases were stuck, the jurisdiction for offence under Section 138 has been proposed to be clearly defined.

Section 138 of the NI Act deals with the offences related to dishonour of cheque for insufficiency of funds in the drawer’s account.

Section 138: Dishonour of cheque for insufficiency, etc., of funds in the account –

Where, any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall, without prejudice to any other provisions of this Act, be punished with imprisonment for [a term which may be extended to two years], or with fine which may extend to twice the amount of the cheque, or with both: Provided that nothing contained in this section shall apply unless;

  1. the cheque has been presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier;
  2. the payee or the holder in due course of the cheque, as the case may be, makes a demand for the payment of the said amount of money by giving a notice in writing, to the drawer of the cheque, [within thirty days] of the receipt of information by him from the bank regarding the return of the cheque as unpaid; and
  3. the drawer of such cheque fails to make the payment of the said amount of money to the payee or, as the case may be, to the holder in due course of the cheque, within fifteen days of the receipt of the said notice.

Explanation.— For the purposes of this section, “debt or other liability” means a legally enforceable

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