New ordinance to aid receivers of bounced cheques

The Union Cabinet on Wednesday decided to bring an ordinance to amend the Negotiable Instruments Act that provides for filing of cheque-bounce cases only in the location where the cheque is presented. This shifts the advantage to the receiver of the cheque when it comes to litigation.

The move is expected to stop the piling of cheque-bounce cases in courts. The Lok Sabha had passed the Negotiable Instruments (Amendment) Bill 2015 in the Budget session last month. But it could not go through the Rajya Sabha, necessitating the ordinance.

The bill passed by the Lok Sabha was meant to overturn a 2014 Supreme Court ruling which said litigation in cheque-bounce cases had to be initiated where the cheque-issuing branch was located. This had shifted the advantage in litigation to the issuer of the cheque. The Statement of Objects of the bill stated that following the apex court ruling, representations were received from various stakeholders, including industry associations and financial institutions, stating that the judgment would offer undue protection to defaulters at the expense of complainants.

But during the passage of the bill in the Lok Sabha, some BJP MPs had questioned if the law would be used by corporates to harass the common man. The government, however, is of the view that such a law is needed to strengthen the financial system,  especially when India is moving towards a cashless society. According to Finance Minister Arun Jaitley, the jurisdiction for offence has been clearly defined in the bill keeping in view the interest of complainants.

At least 18 lakh cheque-bounce cases are pending in various courts across India. The new law will help consolidate the cases and aid the judicial system. “The government has brought this bill to benefit 18 lakh such people,” Road Transport and Highways Minister Nitin Gadkari said after the Cabinet meeting.

The amendment passed by the Lok Sabha provided that if a complaint against a person issuing a cheque has been filed in court with the appropriate jurisdiction, then all subsequent complaints against that person would be filed in the same court, irrespective of the relevant jurisdiction area.