Negotiable Instruments (Amendment) Bill, 2015 notified

• The Negotiable Instruments (Amendment) Bill, 2015 was passed by the Parliament recently
• The provisions of the Negotiable Instruments (Amendment) Act, 2015 shall be deemed to have come into force on the 15th Day of June, 2015, the day on which the Negotiable Instruments (Amendment) Ordinance, 2015 was promulgated to further amend the Negotiable Instruments Act, 1881.

• The Negotiable Instruments (Amendment) Act, 2015 is focused on clarifying the jurisdiction related issues for filing cases for offence committed under section 138 of the Negotiable Instruments Act, 1881.

Negotiable Instruments Act, 1881

• The Negotiable Instruments Act, 1881 was enacted to define and amend the law relating to Promissory Notes, Bills of Exchange and Cheques.
• The object of the Negotiable Instruments Act, 1881 is to encourage the usage of cheque and enhance the credibility of the instrument so that the normal business transactions and settlement of liabilities could be ensured.
• Section 138 of the Negotiable Instruments Act, 1881 deals with the offence pertaining to dishonor of cheque, drawn for discharge of any debt or other liability, on account of insufficiency of funds in the drawer’s account or on account of the fact that the cheque amount is more than the amount agreed to be paid by the bank, and provides for penalties for such dishonour.

Background

• Earlier, the Supreme Court, in its judgment held that the territorial jurisdiction for cases relating to offence of dishonour of cheques is restricted to the court within whose local jurisdiction such offence was committed, which in the present context is where the cheque is dishonoured by the bank on which it is drawn.
• Various financial institutions and industry associations had expressed difficulties, arising out of the legal interpretation by the Supreme Court
• In view of the urgency to create a suitable legal framework for determination of the place of jurisdiction for trying cases of dishonour of cheques , it was decided by the Government to introduce suitable amendments to the Act

Current amendment

• The Negotiable Instruments (Amendment) Act, 2015, facilitates filing of cases only in a court within whose local jurisdiction the bank branch of the payee, where the payee delivers the cheque for payment through his account, is situated,
• Exception to this is in case of bearer cheques, which are presented to the branch of the drawee bank and in that case the local court of that branch would get jurisdiction.
• The Act provides for retrospective validation for the new scheme of determining the jurisdiction of a court to try a case under section 138 of the Negotiable Instruments Act, 1881.
• The Act also mandates centralisation of cases against the same drawer.

Significance

• The clarification of jurisdictional issues may be desirable from the equity point of view as this would be in the interests of the complainant and would also ensure a fair trial.
• Further, the clarity on jurisdictional issue for trying the cases of cheque bouncing would increase the credibility of the cheque as a financial instrument.
• This is expected to help the trade and commerce in general and allow the lending institutions, including banks, to continue to extend financing to the productive sectors of economy