Regulatory Update: Negotiable Instruments (Amendment) Bill, 2017

The Negotiable Instrument Act, 1881 defines cheques, promissory notes and bills of exchange as valid negotiable instruments and provides for penalties for bouncing of cheques and not honouring these negotiable instruments. The Parliament has recently passed the Negotiable Instruments (Amendment) Bill, 2017 (“Bill”) with an aim to prevent delay/non-payment of cheques issued and to prevent the delay in cheque bounce cases.

  • Insertion of Section 143A: Interim Compensation: The Bill seeks to add a new section 143A to the Negotiable Instruments Act, 1881 (“Act”) under which the Court trying an offence under section 138 may order the drawer of the cheque to pay interim compensation to the complainant, (a) in a summary trial or a summons case, where he pleads not guilty to the accusation made in the complaint; and (b) in any other case, upon framing of charge. This interim compensation will not exceed 20% of the amount of the cheque and has to be paid within 60 days from the date of order. This interim compensation may be recovered in the manner provided under section 421 of CrPC – by way of attachment and sale of any movable property of the drawer, or a warrant to the Collector of the concerned district. If the drawer of the cheque is acquitted, the court shall direct the complainant to repay to the drawer the amount of interim compensation, with interest at the bank rate as published by the Reserve Bank of India, prevalent at the beginning of the relevant financial year, within sixty days from the date of the order.
  • Insertion of Section 148: Deposit: As per this section, in case of an appeal by the drawer against conviction under Section 138 of the Act, the appellate court may order the appellant to deposit a minimum of 20% of the fine or compensation awarded by the trial court within 60 days from the date of order of the appellate court. The amount payable under this section shall be in addition to any interim compensation paid by the appellant under section 143A. The appellate court may direct the release of the amount deposited by the appellant to the complainant at any time during the pendency of the appeal. If the appellant is acquitted, the court shall direct the complainant to repay to the appellant the amount so released, with interest at the bank rate as published by the Reserve Bank of India, prevalent at the beginning of the relevant financial year, within 60 days from the date of the order.
  • The amendment will come into force with effect from the date of notification of the same by the Central Government in the official gazette.
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