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CERTIFICATE COURSE ON NEGOTIABLE INSTRUMENTS

ACT

ASSIGNMENT

Name : -Bitthal Sharma

Email ID :-bitthal90@gmail.com

Contact no. – 7354375175

Negotiable Instruments Act (ASSIGNMENT)

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ANALYTICAL QUESTIONS [Within 200 Words]

10 Marks Each
1. What measures shall be taken to make the enforcement of Section 138 of the Negotiable
Instruments Act more effective and speedier, looking at the present growing concern
for the same?

Ans. 1 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. Several measures can be taken in
order to make its enforcement more effective and more speedier. One of the steps which could
be taken is that the banks could take various steps in order to make the people aware of the
harm which could be caused by the dishonour of check. The bank should make the people
aware of the penalty that the people might have to pay in case they carry dishonour of check.

2. Which Courts have jurisdiction to entertain complaints under Section 138 of the
Negotiable Instruments Act ? Explain with reference to landmark case/cases?

Ans.2 Some of the most important cases pertaining to the jurisdiction of courts under Section
138 are-

1. Jugal Kishore Arun vs. V.A Neelakandan

Bellie, J. observed, that a prosecution for issuing of a cheque without sufficient funds
in the Bank, will have to be instituted before the Court within whose jurisdiction the
cheque was issued.

2. Gautham T. V. Centre v. Apex Agencies

High Court of Andhra Pradesh held that the Court within whose jurisdiction the cheque
is given, or where the information of dishonour is received or where the office of the
payee is situate, will have jurisdiction to try the offence.

3. P.K. Muraleedharan v/s C.K.Pareed and Anr

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 Kerala High court held that the place where the creditors resides or the place where the
debtor resides cannot be said to be the place of payment unless there is any indication to
that effect either expressly or impliedly. The cause of action as contemplated in S. 142 of
the Act arises at the place where the drawer of the cheque fails to make payment of the
money. That can be the place where the Bank to which the cheque was issued is located. It
can also be the place where the cheque was issued or delivered. The Court within whose
jurisdiction any of the above mentioned places falls has therefore got jurisdiction to try the
offence under Section 138 of the Act.

3. Explain the following :-

 Bearer Cheque
 Order Cheque
 Uncrossed Cheque
 Crossed Cheque
 Post Dated Cheque
 Stale Cheque

Ans.3 Bearer Cheque- When the words “or bearer” printed on the cheque is not cancelled,
the cheque is called a bearer cheque. A bearer cheque is made payable to the bearer i.e. it is
payable to the person who presents it to the bank for encashment. However, such cheques are
risky, this is because if such cheques are lost, the finder of the cheque can collect payment from
the bank. Bearer cheque can be transferred by mere delivery; they need no endorsement. In
simple words a cheque which is payable to any person who presents it for payment at the bank
counter is called ‘Bearer cheque’.

Order cheque- When the word “or bearer” printed on the cheque is cancelled and and the word
‘order’ may be written on the cheque, the cheque is called an order cheque. An order cheque is
one which is payable to a particular person. The payee can transfer an order cheque to someone
else by signing his or her name on the back of it.

Uncrossed cheque- When a cheque is not crossed, it is known as an “Open Cheque” or an

“Uncrossed Cheque”. These cheques may be cashed at any bank and the payment of these
cheques can be obtained at the counter of the bank or transferred to the bank account of the
bearer. An open cheque may be a bearer cheque or an order one.

Crossed cheque- Crossing of cheque means drawing two parallel lines on the left corner of
the cheque with or without additional words like “Account Payee Only” or “Not Negotiable”.
A crossed cheque cannot be encashed at the cash counter of a bank but it can only be credited
to the payee’s account. This is a safer way of transferring money then an Uncrossed or open
cheque.
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Post- dated cheque- Cheque on which drawer mentions a date which is yet to come(future
date) to the date on which it is presented, is called post-dated cheque. For example, if a cheque
presented on 10th Jan 2010 bears a date of 25th Jan 2010, it is a post-dated cheque. The bank
will make payment only on or after 25th Jan 2010.

Stale cheque- If a cheque is presented for payment after six months from the date of the cheque
it is called stale cheque. After expiry of that period, no payment will be made by banks against
that cheque.

4. Considering the present day developments, how do you think some aspects of the
Negotiable Instruments Act be bought online?

Ans. 4 Some of the aspects of the negotiable instruments act can be bought online by posting
the negotiable instruments act, 1881 online so that everyone has access to the act. Since
everyone would have access to the act online, this would mitigate the instances of dishonour
of cheques since everyone would know about the repercussions of the act. Other than this, the
public would have access to the act if it is bought online.

5. What were the 2015 and 2018 Amendments to the Negotiable Instruments Act? What
purpose would they serve?

Ans. 5 2015 Amendment- The Negotiable Instruments (Amendment) Act 2015 came in to
force with retrospective effect. According to the notification published in the official Gazette
dated 26.12.2015 the Amendment shall be deemed to have come into force on the 15th day of
June, 2015. Rajya Sabha passed the Negotiable Instrument (Amendment) Bill 2015 on
7th December 2015 . Lok Sabha had passed the Bill in August 2015. The Act will replace
Negotiable Instrument (Amendment) ordinance which was re-promulgated on 25th September
2015.

As per the Amendment The offence under section 138 shall be inquired into and tried only by
a court within whose local jurisdiction,— (a) if the cheque is delivered for collection through
an account, the branch of the bank where the payee or holder in due course, as the case may
be, maintains the account, is situated; or

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(b) if the cheque is presented for payment by the payee or holder in due course, otherwise
through an account, the branch of the drawee bank where the drawer maintains the account, is
situated.

2018 Amendment- The Lok Sabha passed Negotiable Instruments (Amendment) Bill, 2017
on July 23, 2018, Rajya Sabha 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.

Some of the features of the amendment act include-

 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.

 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.

 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.

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