Amendment to Negotiable Instruments Act, 1881

The Negotiable Instrument Act has been amended from time to time to make the laws more
stringent relating to dishonour of cheques against dishonest drawers of cheques. Repeated
efforts have been made by the various organs to reduce the abuse of process of law by the
accused. Before the amendment made in the year 1988, through which section 138 to 142
were inserted, the act of dishonour of cheque was treated as an offence under IPC. Since
penal law is based on proof so it is easier for drawer of dishonoured cheque to evade the
rigorous of punishment by raising the doubts.

After inserting these sections under Negotiable Instruments Act the position has certainly
improved and the number of cases on dishonoured of cheque has relatively came down. After
this, again the amendment was made in the year 2002, which results into the insertion of
section 143 to 147 which becomes the part of the main act.

[Section 143- Intended to achieve speedy trial.

Section 144- Mode of service of summons.

Section 145- Evidence on Affidavit.

Section 146- Presumption to bank memorandums

Section 147- Offences to be compoundable]

Along with this the 2002 amendment also made changes in the section 138, 141 & 142 i.e.
doubling the imprisonment term from one year to two years and the period of time to issue
demand notice to the drawer from 15 days to 30 days and by providing immunity from
prosecution for nominee director. It has also been provided that the Magistrate may condemn
the delay in filing the complaint in special and peculiar circumstances.

NEGOTIABLE INSTRUMENT (AMENDMENT) ACT, 2018

This act was recently passed by the parliament and came into effect from September 1, 2018.
It introduces the substantial changes in the Negotiable Instruments Act, 1881, which have
may have significant impact on the commercial transaction and ability of the parties to
transact through negotiable instruments.

There was need for this act because amended provisions will help in the reducing the undue
delay in cheque bounces cases pending in the courts and to strengthen the credibility of
cheque. This will also help in providing temporary relief to the aggrieved until a final verdict
has been passed in the court, thus discouraging frivolous or unnecessary litigation which
would save time and money.

The statement of objects and reasons of the Negotiable Instruments (Amendment) Bill, 2017
states that the amendment had been introduced “with a view to addressing the issue of undue
delay in final resolution of cheque dishonour cases so as to provide relief to payees of
dishonoured cheques and to discourage frivolous and unnecessary litigation which would
save time and money”.

KEY CHANGES:

 POWER TO DIRECT INTERIM COMPENSATION

This amendment inserts a new section 143A in the Act. It empowers the court in a summons
trial or a summons case, to direct the Drawer to pay interim compensation to the
Complainant, in two scenarios:

(i) At the time the Drawer pleads not guilty to the accusations made in the complaint
(ii) In any other case, upon framing the charge.

The new provision seeks to cap interim compensation to 20% of the cheque amount which is
to be paid within 60 days from the date of its order or which is further extended to period of
30 days if the drawer provides sufficient cause for such delay. If the drawer fails to pay the
said compensation within the stipulated time period the court may recover the said amount as
a fine under Section 421 of Crpc.

 POWER OF APPELLATE COURTS TO ORDER THE COMPLAINANT TO DEPOSIT A SUM

Another provision introduced is section 148 which specifies that in the case drawer files an
appeal against his/ her conviction, the Appellate Court has the power to direct the drawer to
deposit a minimum of 20% of the fine or compensation that was awarded by the Trial Court.
It is provided that this amount shall be in addition to the compensation paid under section
143A. It is to be paid within 60 days from the date of its order or which is further extended to
period of 30 days if the drawer provides sufficient cause for such delay. 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.

It is provided that in case of an acquittal of the drawer/ appellant by the Trial Court or the
Appellate Court, the payee/complainant shall be directed to repay the interim compensation
or amount deposited, 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.

CONCLUSION

Though the act has been amended various times before for the speedy trial of the cases but
even then there is dissatisfaction regarding the pendency of suits. Additionally, it was not
sufficient enough to provide justice to the payee. So the amendment act of 2018 comes across
as a sign of relief for the payee of the cheque, who has invest a significant amount of time
and energy in the court to recover the money due to him in cheque bounce case. It was
necessary that the recovery provisions have been strengthened which helps in enhancing the
trade and commerce industry and to strengthen the credibility of the cheque. Therefore, we
can say that even the present amendment is not without challenges but it is able to fulfil its
objectives of faster disposal of cases and providing relief to payee or genuine holders of
dishonoured cheques.