1 August 2018

  THE NEGOTIABLE INSTRUMENTS (AMENDMENT) BILL, 2017

 Introduction:

1. The Parliament has recently passed the Negotiable Instruments (Amendment) Bill, 2017 (Bill or Amendment), amending the Negotiable Instruments Act, 1881 (Act), with respect to provisions relating to dishonour of cheques. The Amendment will come into force when the Central Government notifies it in the Official Gazette. 
   
   
2. The proposed Amendment is due to the increased pendency of complaints/cases regarding dishonour of cheques and has been promulgated to deter payers from delaying the realisation process in relation to cheques issued by them. 
   
   
3. This update briefly summarises the provisions of the Bill/Amendment along with reasons for the same.

Important Amendments:

1. Interim compensation: The Amendment states that, if the drawer of a cheque, against whom the court is trying an offence under Section 138 of the Act (dishonour of cheque due to insufficiency of funds in the account), pleads not guilty to the accusation made in the complaint, or in any other case framing a charge; the court may direct the accused drawer to pay an interim compensation to the complainant.
   
   Such interim compensation must not exceed 20% of the amount of the cheque, and it is to be paid within the time prescribed (see below).
   
   
2. Acquittal of drawer: If the drawer of the cheque is acquitted, the court shall direct the complainant to repay to the drawer, the amount of interim compensation paid by him. Such repayment is to include interest at the rate published by the Reserve Bank of India (RBI) prevalent at the beginning of the relevant financial year and must be paid within the time prescribed (see below).
   
   The amount of fine imposed under this Act or compensation awarded under the Code of Criminal Procedure (CrPC) must be deducted by the amount of interim compensation paid or recovered. 
   
   
3. Appeal in appellate court on conviction of drawer: A drawer of the cheque can appeal in an appellate court on conviction under Section 138 of the Act. The appellate court can order the drawer to deposit an amount which is a minimum of 20% of the fine/compensation awarded by the trial court. This amount shall be in addition to the interim compensation paid by the drawer in the trial court. The court may release the deposit to the complainant at anytime during the pendency of appeal.
   
   This amount is to be deposited within the time prescribed (see below).
   
   If the drawer is acquitted, the court must direct the complainant to repay the amount released, with interest at the rate published by the RBI prevalent at the beginning of that financial year. This amount is to be repaid within the time prescribed.
    
4. Time prescribed for payment of interim compensation / repayment of interim compensation / deposit/ repayment of deposit released: All amounts with respect to the interim compensation/ repayment of interim compensation/ deposit/ repayment of deposit released mentioned above are to be paid within 60 days from date of order. Such period of 60 days can be extended by a further period of 30 days by court direction after showing sufficient cause for delay.
   
    
   MHCO COMMENT: 
   In our experience, cheque bouncing cases usually take 3 to 5 years to be resolved. Therefore, this Amendment requiring the drawer to pay 20% deposit may not achieve the intent of speedy disposal of cases. For this purpose, additional courts may be required to be set up. However, deposit of money will give some relief to aggrieved party. 
   The views expressed in this update are personal and should not be construed as any legal advice. Please contact us directly on +91 22 40565252 or legalupdates@mhcolaw.com for any assistance