The Negotiable Instruments (Amendment) Bill, 2017 was passed in Lok Sabha

• It seeks to amend the Negotiable Instruments Act, 1881.
• The Act defines promissory notes, bills of exchange, and cheques.
• It also specifies penalties for bouncing of cheques, and other violations with respect to such negotiable instruments.

Background:

• The Central Government has been receiving several representations from the public, including the trading community, relating to the pendency of cheque bounce cases.
• The same may be imputed to the delay tactics adopted by unscrupulous drawers of dishonoured cheques on account of the ease of filing of appeals and obtaining stay on proceedings.
• As a result of this, injustice is caused to the payee of a dishonoured cheque who has to spend considerable time and resources in court proceedings to realise the value of the cheque.
• Such delays compromise the sanctity of cheque transactions.

Highlights:

Interim compensation

• The Bill inserts a provision allowing a court trying an offence related to cheque bouncing, to direct the drawer (person who writes the cheque) to pay interim compensation to the complainant.
• This interim compensation may be paid under certain circumstances, including where the drawer pleads not guilty of the accusation.
• The interim compensation will not exceed 20% of the cheque amount, and will have to be paid by the drawer within 60 days of the trial court’s order to pay such a compensation.

Deposit in case of appeal:

• The Bill inserts a provision specifying that if a drawer convicted in a cheque bouncing case files an appeal, the appellate court may direct him to deposit a minimum of 20% of the fine or compensation awarded by the trial court during conviction.
• This amount will be in addition to any interim compensation paid by the drawer during the earlier trial proceedings.

Returning the interim compensation:

• In case the drawer is acquitted (during trial or by the appellate court), the court will direct the complainant to return the interim compensation (or deposit in case of an appeal case), along with an interest.
• This amount will be repaid within 60 days of the court’s order

Analysis:

• The bill addresses 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.
• The proposed amendments will strengthen the credibility of cheques and help trade and commerce in general by allowing lending institutions, including banks, to continue to extend financing to the productive sectors of the economy.