(Source: BloombergQuint)

Provisions To Curb Cheque Bouncing Passed By Lok Sabha

The average pendency of bounced cheque cases is almost four years in India’s subordinate courts, Daksh—a civil society research organisation—said in its 2017 Probing Pendency and Performance of Courts report.

On the last count by the Law Commission, back in 2008, there were more than 38 lakh cheque bounce cases pending before various courts. The average pendency and number has only grown since then.

It’s these ills that the government has now proposed to cure by amending the Negotiable Instruments Act, 1881. Section 138 of this Act makes cheque bouncing a criminal offence punishable with up to two years of imprisonment.

The Lok Sabha has approved the following changes through the Negotiable Instruments (Amendment) Bill, 2017:

Also read: Fake Cheques A Cause For Worry, Says RBI Deputy Governor Mundra

Interim compensation: The first change gives courts the power to direct the drawer—the person who writes the cheque—to pay interim compensation to the complainant. The court can direct the drawer to pay up to 20 percent of the cheque amount where he pleads not guilty of the accusation.  It’ll have to be paid within 60 days of the trial court’s order to pay such a compensation.

This is a welcome step since it will enable a payee (a person to whom money is to be paid) to recover at least a part of the amount that was due to him, Ananya Kumar, a litigation partner at law firm JSA, told BloombergQuint.

Hopefully, the requirement of payment will act to counterbalance the time being taken in disposal of the Section 138 proceedings, vis-a-vis the deterrence factor.
Ananya Kumar, Partner, JSA

Interim compensation may be awarded by the court trying the offence at the initial stages of the proceedings—upon framing of charges or when accused pleads not guilty in a summary trial or a summons case, Ameya Khandge, partner at Trilegal, said.

Appeal And Deposit: The second amendment aims to deter appeals. If a drawer, convicted of the cheque bounce offence, decides to appeal, he can be asked to deposit a minimum of 20 percent of the compensation awarded by the trial court. This would be over and above the interim compensation amount.

Return With Interest: If the drawer is found to be not guilty, the complainant would have to return the interim compensation and deposit with interest.

Refund with interest, if the payee is eventually unsuccessful, safeguards the drawer’s interest, Kumar said. The proposed changes are also in consonance with the presumption under the Act against the drawer of the cheque, he said.