Lok Sabha Passes Bill on Cheque Bounce Cases

• 24 Jul 2018

The Lok Sabha has passed the Negotiable Instruments (Amendment) Bill. The Bill seeks to amend the Negotiable Instruments Act, 1881.

• Negotiable instrument is a signed document that promises a sum of payment to a specified person or the assignee.
• It is transferable in nature, allowing the holder to take the funds as cash or use them in a manner appropriate for the transaction or according to their preference.
• Promissory notes, bills of exchange, and cheques are categorised as the negotiable instruments.
• The Bill specifies penalties for bouncing of cheques, and other violations with respect to such negotiable instruments.
• The Bill is expected to help bring down litigation and provide credibility to cheques and banking system. The Bill aims to reduce inordinate delays in cheque bounce cases.
• The amendment is in line with the government’s push to make India a less cash economy.

Key Highlights of the Bill

• It allows a court hearing a cheque bounce case to direct the drawer (the person who wrote the cheque) to pay interim compensation to the person who filed the complaint.
• The interim compensation which is to be paid within 60 days of the court’s order can be up to 20% of the value of the cheque.
• The interim compensation may be paid under certain circumstances, including where the drawer pleads not guilty of the accusation.
• The Bill specifies that if a drawer convicted in a cheque bouncing case files an appeal, the appellate court may direct him to deposit a minimum of 20% of the fine or compensation awarded by the trial court during conviction.
• This amount will be in addition to any interim compensation paid by the drawer during the earlier trial proceedings.