Aug 112018

Effects of amendment in section 138 of negotiable instrument act

Roadmap of amendment till date:

Year Bill No Short Title Date of introduction Passed in LS Passed in Rs Referred to / Report presented by committee Notification no Synopsis
2017 28 The Negotiable Instruments (Amendment) Bill, 2017


2nd Jan 20118 23rd July 2018    


Yet to come  

Use of negotiable instruments i.e. cheques:

A   negotiable instrument like most commonly used, cheque is acceptable mode of payment in lieu of payment in money and it is negotiable. However, by the fall of moral standards these cheque started losing their credibility by not being honoured. And an action in the court for collection of the proceeds of cheque is defeating its very purpose.

Before amendment situations:

Central government is receiving representation from public that delay tactics are being adopted by drawer of cheque because as of now there is ease in filing appeal and then obtaining stay on proceedings. This cause injustice to the payee who have to spent lot of money, time and resources for realizing his money back

Objects of amendment:

It is proposed to amend the said act with a view of address:

  • The issue of undue delay in final resolution of cheque dishonour of cases
  • To relief to payees of dishonoured cheques
  • To discourage frivolous and unnecessary litigation which would save time and money.
  • Strengthen the credibility of cheque.

Effect of amendments:

Section 138 of instrument act – “where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall, without prejudice to any other provision of this Act, be punished with imprisonment for a term which may be extended to two years, or with fine which may extend to twice the amount of the cheque, or with both.”

Now after insertion of section 143A and 148 provisions are made for interim relief to the payee as explained below:

  1. Payment by the drawer of the dishonoured cheque to the payee thereof of interim compensation of an amount not exceeding 20% of the value of the instrument, during the pendency of proceedings for the offence of dishonour under Section 138 of the Act-
    1. in a summary trial or a summons case, where the drawer pleads not guilty to the accusation made in the complaint; and
    2. in any other case, upon framing of charge
  2. The said interim compensation has to be paid within a period of 60 days from the date on which the order to that effect is made.
  3. The interim compensation so paid by drawer shall be deductible upon final conviction.
  4. The so called interim compensation is recoverable by way of attachment and sale of any immovable property or as an arrears of land revenue from movable or immovable property.
  5. However, if drawer is freed the payee is liable to pay back compensation so received with interest @ bank rate prevailing at the beginning of financial year.
  6. In case of appeal against the conviction under section 138 the appellate court may order to deposit a minimum of 20% of the fine or compensation so awarded by the trail
  7. During the pendency of appeal the appellate court may direct the release the amount so deposited to the complainant.

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