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New Laws for Cheque Bounce in India

 Negotiable Instruments (NI) Act was enacted in 1881 to govern the provisions relating to negotiable instruments like Promissory Notes, Bills of Exchange and Cheques. The most widely used (and abused) provision in the Negotiable Instruments Act is Section 138 dealing with cheque bounce or dishonour of cheques. This NI Act has been amended / altered time and again to make the law relating to dishonour of cheque even more stringent against the drawers (payer of the money) of the cheque, who indulge in fraudulent practices, thus abusing their position.


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Despite such efforts of the legislature and the judiciary to curb this abuse, the drawers (payer of the money) were still succeeding in their efforts to delay the court proceedings (against him/her) in addition to harassing the payee (receiver of the cheque) by appealing against the court orders. The entire course of attempting to get the rightful payment itself turned out to be an extremely tedious, lengthy and cumbersome process for the payee.


Considering the problems faced by the payee, the Negotiable Instruments (Amendment) Bill 2017 was put before the Lok Sabha by the Finance Minister in January 2018. The Bill received the assent of the President of the country and became an Act on 02.08.2018, called the Negotiable Instruments (Amendment) Act 2018.

 


What are the changes/amendments in the cheque bounce law?

Two new provisions by way of S. 143A (Power to provide for interim compensation to the complainant) and S. 148 (Power of appellate court to order payment pending appeal against conviction), have been incorporated into the NI Act after the said amendment. These modifications have been made to shorten the process of granting relief to the aggrieved payee and to insert additional provisions to provide interim compensation to the payee of the bounced cheque.


Consult: Top Cheque Bounce Lawyers in India 


The following are the changes that were introduced by the said amendments:

 


A.   Interim Compensation to the Complainant – Section 143A


1. Interim Compensation: Under this new section, the Courts have the power to order the drawer of the cheque to pay interim compensation to the complainant.


2. Order by the Court: The compensation has to be ordered by the Court to be paid by the drawer of the cheque, where the drawer pleads not guilty to the allegations made in the complaint, in a summary trial or summons case. In any other case, the compensation has to be ordered upon the framing of the charges.


3. Amount of Compensation: The compensation to be paid by the drawer of the cheque should not be more than 20% of the amount of the bounced cheque.


4. If the Drawer is Acquitted: When and if the drawer is acquitted / held not guilty, then the payee may also be ordered to refund to the drawer, the interim compensation along with the amount of interest (at RBI’s prevailing interest rate).\


5. Time Frame to Pay Interim Compensation: It should be paid within a period of 60 days, starting from the date of the order by the Court. This time period can be extended by another 30 days if sufficient reasons for delay can be shown to the Court.


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B.    Payment Pending the Appeal against Conviction – Section 148

 

1. Deposit of Amount by Appellant: Under this new section, the Appellate Court has the power to order the appellant to deposit an amount which shall be in addition to the amount already paid by the appellant by way of Section 143A.


2. Amount of Compensation: The amount ordered by the appellate court should be a minimum of 20% of the compensation or fine which was awarded/ordered to be paid by the trial/lower court.


3. Deposit may be Released to Complainant: This deposit by the appellant can be released to the complainant by an order, during the pendency of the appeal.


4. If the Appellant is Acquitted: In case the appellant is acquitted, the Court has to direct the complainant to refund the entire deposit amount and in addition to that, he/she shall also pay interest at RBI’s prevailing interest rate.


5. Time Frame to Deposit Amount: It should be paid within a period of 60 days, starting from the date of the order by the Court. This time period can be extended by another 30 days if sufficient reasons for delay can be shown to the Court.


Consult: Top Cheque Bounce Lawyers in India 

 


What are the changes in the cheque bounce law aimed at?

The Negotiable Instrument (Amendment) Act has been enacted with an aim to address the issue of undue delay in resolving cheque bounce matters in order to ensure and provide relief to the payees of the dishonoured cheques and to discourage unnecessary litigation. If the process is sped up, it would without a doubt save time and money. The amendments have been introduced to strengthen the credibility of the cheques and to cope with the modern banking system in India. The aim is to aid the trade and commerce in the country by allowing financial/lending institutions (such as banks) to continue financing the productive sectors of the economy.   


The new law aims at speedy disposal of the pending cases under the Act and provides for interim compensation to the payee, who filed complaint against the drawer for non-payment of the amount of the cheque.


Recently it has also been held by the Supreme Court that Section 148 (as added by the Amendment Act) will also be applicable to appeals against order of convictions under Section 138 even in those cases where the criminal complaints for the offence of cheque bounce were filed before September 1, 2018 – thus giving it retrospective effect.


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Advantages of the changes in the cheque bounce law

The new Amendment Act is expected to come as a relief for the Payee (Complainant) of the Cheque who spends copious amounts of time, energy and money in order to recover the amount which is rightfully his/hers. Due to addition of the aforesaid provisions, the payee will get the compensation/amount much faster than before and this will also aid in reducing the huge number of cheque bounce matters that the Courts are burdened with.


The changes in cheque bounce laws are advantageous not only for the payee but also for the drawer of the cheque. Sometimes there are false implications made by the payee against the drawer, in such conditions if the drawer is acquitted and no case was found against him, then under section 148 of this Act the court can order the payee to repay the amount of compensation with interest which was awarded by the trial court. This provision of repayment of compensation will provide relief to the genuine party. The changes are advantageous as they are likely to strengthen the credibility of issued cheques. 


The recovery provisions are being strengthened so that the businesses are relieved and safeguarded from excessive hardship.

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