ABSTRACT
The Negotiable Instruments (Amendment) Bill,2017 was implemented in Lok Sabha on 2nd Jan, 2018. It seeks to brought significant Juridical Transformation by amending the Negotiable Instruments Act,1881. It defines promissory notes, bills of exchange, and cheques. Prominently it specifies penalties for bouncing cheques and other violation with respect to herein mentioned. This amendment aimed to enhance the creditability of negotiable instruments by introducing stricter penal provisions to deter fraudulent practices and streamline dispute resolution process. They are in the form of:-
Interim compensation, section 143A: The legislation introduced a clause empowering a court adjudicating a case concerning a bounced cheque to instruct the Drawer (the individual who issued the cheque) to provide an interim sum as compensation to the complainant. This provision applies when the Drawer contests the allegations. The interim compensation should not surpass 20% of the cheque's value and must be remitted by the Drawer within 60 days of the trial court's directive to disburse such compensation.
Deposit in case of appeal, section 148: By incorporating section 148, the bill introduces a provision stipulating that if a drawer is found guilty in a cheque bouncing case and subsequently appeals to a higher appellate court, the court may require the drawer to deposit at least 20% of the fine or compensation imposed by the trial court upon conviction. This sum is separate from the interim compensation previously paid by the drawer during the initial trial proceedings.
The main reason that prompted the 2018 amendment is the significant issue of continuous dishonouring cheques and the other fraudulent activities, these incidents were tampering trust in negotiable instruments such as cheques and promissory notes. Hence, the need of amendment arises, the revision of 2018 are of the commendable initiative is geared towards enhancing efficiency and promptness, thereby facilitating the swift resolution of cases and deterring frivolous and unwarranted legal actions. 1.
KEYWORDS
2018 Amendment of Negotiable Instruments Act,1881, Interim Compensation, Deposit in case of appeal, Dishonouring of cheque.
INTRODUCTION
The Negotiable Instruments Act, 1881 (hereinafter referred as NI Act) does not provide a proper definition of the negotiable instrument still, section 13 of NI Act defines Negotiable Instrument as “promissory note, bills of exchange, or cheque payable either to order or to bearer”. In the words of Prof. Goode, The word “Negotiable” means transferable from one person to another, and the term “Instrument” means a document of title of money.
The NI Act was introduced precisely to establish trust among people regarding negotiable instruments, which is why amendments are brought in from time to time to strengthen this trust further. The Indian courts are currently facing a substantial backlog od cases, which is putting strain on the judiciary. Around 20-30% of these cases specifically pertains to cheque dishonor under section 138 of the NI Act. This issue serves as a crucial impetus to grant authority to the NI Act and enforce stringent penalties to deter litigation and spare individuals from distress, thereby upholding trust in negotiable instruments.
Hence, The Central Government through The Negotiable Instrument (Amendment) Act,2018 has notified amendments to the NI Act by incorporating several new provisions, these inputs focused at issue of undue delaying, efficacy and efficiency in cases related to dishonor of cheques, leads to implementation of two important sections in NI Act, they are, section 143A (interim compensation) and section 148 (deposit in case of appeal).
LITERATURE REVIEW
The Negotiable Instruments Act, 1881, has undergone several amendments to keep pace with the changing economic environment and address emerging issues regarding dishonoured cheques and refining legal process concerning negotiable instruments. Prior to 2018 amendment the act majorly went through the following:-
Dishonour of Cheques: 2002 Amendment, The Negotiable Instrument (Amendment and Miscellaneous Provision) Act, 2002 is legislation that amends the NI Act, 1881, The Bankers Book Evidence Act, 1891, and the Information Technology Act, 2000. It was enacted on December 17, 2002, and became effective on February 6, 2003. The primary objectives of the act include expediting the resolution of cases related to dishonored cheques, increasing penalties for offenders, introducing electronic images of truncated cheques and electronic cheques, and exempting official nominee directors from prosecution under the act.
The Negotiable Instruments (Amendments) Second Ordinance, 2015 The bill was presented in the Lok Sabha on May 6, 2015. It aims to modify the current act by specifying that cases of bounced cheques can only be filed in a court situated within the jurisdiction where the bank branch of the payee is located.
However, the 2018 amendment enhances the legal framework for digital transactions by introducing provisions like interim compensation for payees in case of cheque dishonour, improving efficiency and security in financial dealings, hence, superior to previous amendments. This amendment emphasize on two important aspect as add on to NI Act:-
Section 143A (Power to Interim Compensation)- The inclusion of section 143A grants authority to the court when adjudicating an offence under section 138 of the NI Act to instruct the issuer of the check to provide interim compensation to the plaintiff on two instance-
In a summary trial or summon trial, when the issuer denies the allegation in the complaint
In all other situations, once charges are formally filed.
The Interim Compensation safeguards the complainant’s interests until the drawer’s guilt is proven under section 138 of NI Act. It provides compensation upto 20% of the total cheque amount. If convicted, this amount id deducted from the final payment to the complainant. In case of acquittal, the complainant must return the interim compensation with interest within 60-90 days.
In case of GJ Raja VS. Tejraj Surana (2019) 2, in this case, the Supreme Court clarified that section 143A of the NI Ac, 1881 shall not have retrospective effect. Moreover, The Karnataka High Court has said that it is not mandatory for the magistrate courts to pass orders directing interim compensation under section 143A of NI Act, if the accused does not plead guilty. A single judge bench of Justice M. Nagaprasnna said “The legislature cautiously worked sub-section (1) of section 143A not to make it mandatory in all cases”.
Section 148 (Power of the appellate court to order payment pending appeal against conviction) – The addition of section 148 in the NI Act, deals with the appeals against section 138 convictions. It requires the appellate to deposit at least 20% of the trail court’s fine or compensation, on top of interim compensation from section 143A. this provision benefits the complainant during appeals and discourage unnecessary delays. The court decides the appeal deposit amount based on each case. If the appellant is acquitted, the court orders the complainant to repay the amount with interest, following a similar process as section 143A of the act. Surinder Singh Deswal v. Virender Gandhi 3, the Supreme Court upheld the provisions of Section 148, reinforcing the legislative intent to prevent misuse of the legal process by the appellants.
Constitutional Bench of Supreme Court guidelines dated 16.04.2021 in cheque bounce cases
The Supreme Court directed all High Courts across the country to issue guidelines for trial courts to deal with cheque bounce cases:
The evidence in cheque dishonor cases can now be tendered by filling affidavits and there would be no need to examine fitness physically.
The bench also asked the center to make ‘suitable amendment’ in the NI Act to ensure that trials in cheque bounce cases lodged in 12 months against a person can be clubbed together into one consolidated case.
High courts to identify pending revisions arising from complaints under section 138 and subsequently refer them to mediation.
The bench requested high courts to issue direction to the magistrates to record reasons for any conversion of trial complains under section 138.
METHODOLOGY
To comprehensively analyze the topic, a methodological approach involves a detailed examination of the key amendments introduced, notably the incorporation of section 143A and section 148. This entails a thorough investigation into the practical implications and judicial interpretations of these amendments to gauge their impact on legal proceedings concerning dishonored cheques and associated offenses.
Moreover, a critical aspect of the methodology entails a meticulous review of post-amendment case laws particularly landmark cases, to discern how the judiciary has construed and implemented the revised provisions. By scrutinizing the evolution of legal precedents, judicial rationale and the overall efficacy of the amendment act in addressing issues related to dishonored cheque, a comprehensive understanding of the juridical transformation brought about by the 2018 amendment to the negotiable instruments act can be achieved.
RESULTS
Pre- 2018 revision, the legal landscape was saturated with mostly section 138, NI Act matters, but post-amendment a notable decline is evident. Currently, only authentic cases receive individualised focus, resulting in more successful outcomes. This marks a shift from the past where around 30% of court cases revolved around section 138, with a significant portion being deceitful. This amendment has thus ushered in a more discerning approach, ensuring that only legitimate cases are prioritized for resolution, thereby enhancing the efficiency and integrity of the legal process.
The analysis from below mentioned table indicates how the reduction has occurred in fraudulent and unnecessary litigation matters of cheque bounce, compared to before the 2018 amendment 4.
Here are the key pointer which decodes the benefits of herein mentioned amendment:-
Achievement in Deterrence- The revision have been progressive agent in forming a stronger deterrent for cheque dishonour. The possibility of tackling instant financial penal provisions through interim compensation has likely contributed to a decrease in the incidence of dishonoured cheques.
Unvarying use- The judiciary's consistent implementation of the amendments in different cases has led to a more foreseeable and trustworthy legal setting, which benefiting all stakeholders engaged in cheque transactions.
Effect on Businesses and Financial Institutions- The revision have offered businesses and financial institutions with an effective and efficient manner to recover pending dues out of dishonoured cheques. The probability of obtaining interim compensation has uplifting obliges, enhancing their confidence in the legal system's ability to protect their financial interests.
Discouragement in Frivolous Appeals- The requirement under Section 148 has deterred frivolous appeals, as appellants or Drawers are now required to deposit a portion of the fine or compensation of minimum 20% of total amount of cheque after paying interim compensation too before proceeding. This provision has ensured that only serious appeals are pursued, thereby improving the overall efficacy of the judiciary.
DISCUSSION
The 2018 Amendment of Negotiable Instruments Act holds significant importance as it aspired to:-
Enhanced the legal framework concerning negotiable instruments, notably cheques.
Reinforced trust and creditability in the banking sector via stringent penalties for cheque dishonour.
Expedited the resolution of cheque bounce cases by enabling complaints to be lodged at the place of cheque presentation.
Promoted financial discipline and upheld the efficiency of financial transactions involving negotiable instruments 5.
Apart from the importance, there are also some challenges and critics that this amendment has faced, as they have,
Stricter provisions, which may have unintended consequences for those facing genuine financial difficulties.
There has been an instances where defendants are unable to pay the interim compensation which leads to increased penal and legal complexities, which could burden the legal system with more cases related to dishonoured cheques.
Some critics question the effectiveness of the amendment in addressing the root causes of cheque dishonour.
Critics argue that the provisions for interim compensation and deposit during appeals may disproportionately affect small businesses and individuals who may not have the financial resources to comply.
An overview - The revision, despite facing criticism, stands as a significant legal advancement in the realm of financial transactions. This legislative change embodies a crucial shift towards ensuring the accountability and integrity of negotiable instruments, particularly cheques, in the Indian financial landscape. By imposing stricter penalties for cheque dishonour, the 2018 amendment serves as a deterrent against fraudulent practice, thereby bolstering trust in the banking system and fostering financial discipline among individuals and business, which the former revisions were unable to do so.
Question of Law- within the legal context the ‘question of law’ arising from this revision revolves around the interpretation and application of the revised legal provisions. Legal practitioners and courts must navigate and determine the correct understanding and implementation of the amended laws concerning cheque bounce cases.
Question of Fact- pertains to the specific circumstances and factual elements of individuals cases. This includes examining whether the cheque bounce occurred due to deliberate fraudulent actions or genuine financial constraints, highlighting the importance of discerning factual realties within the legal framework to ensure just and equitable outcomes.
CONCLUSION
The revisions to the NI Act are heftily pointed at strengthening efficacy and expediency which will help in speedy disposal of cases and also discourage the frivolous and unnecessary litigation. Undoubtedly, the Amendment Act represents a significant stride in bolstering the trustworthiness of cheques, thereby providing a substantial impetus to the realms of trade and commerce. By introducing provisions such as interim compensation under section 143A and mandating payment by the accused during an appeal against conviction as per section 148, the Act not only safeguards the interests of the complainant but also reinforces the integrity of financial transactions. This legislative measure is poised to instill greater confidence in the use of cheques, fostering a more secure and efficient business environment conducive to economic growth and stability. The 2018 revision of the NI Act, represented a profound paradigm shift in the legal landscape governing negotiable instruments. This revision was a pivotal step, targeting to contemporize and rationalize the regulatory framework concerning negotiable instruments such as promissory notes, bills of exchange, and cheques. The amendment were meticulously crafted to fortify security protocols, mitigate fraudulent activities, and harmonize the law with the prevailing commercial practices. By elucidating intricate facets such as liabilities, dishonour occurrences, and enforcement modalities, the revision forfeited the legal infrastructure surrounding negotiable instruments 6.
These modifications not only revamped the legal milieu but also aspired to enhance the efficiency and efficacy of negotiable instrument transactions, fostering more successful and secure milieu for financial dealings. Though it is a positive direction in the cheque offence cases, but still more is to be done, to make the cheque bounce cases practical and summary trial has to be given its true meaning for justifiable revision, otherwise the whole purpose behind introducing cheque bounce a criminal offence would lost its importance and become fatal carrying no importance or any prominent use. The 2018 revision’s impact reverberated throughout the legal community, setting a new standard for the regulation and operation of negotiable instruments, thereby elevating the integrity and reliability of financial transactions in the modern commercial landscape. However, the results also outshining the need for ongoing reforms to mention the critics and unintended consequences that have emerged. By evaluating the overall research, the amendments represent a prominently positive moment towards the evolution and development of India's financial and legal systems.
AUTHOR:
IPSA RATTAN
FAIRFIELD INSTITUTE OF MANAGEMENT AND TECHNOLOGY, GGSIPU
REFERENCES:
1. DRISHTI JUDICIARY, MERCANTILE LAW, (class notes for judiciary exams).
2.G.J. Raja VS. Tejraj Surana, (2019) 1160 of 2019@ SLP(Crl.)No.3342 of 2019 (India).
3.Vivek Gupta, The Negotiable Instrument (Amendment) Act, 2018- An Overview, Singhania & Partners, (09-May-2020), https://singhania.in/blog/the-negotiable-instrument-amendment-act-2018-an-overview.
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