Ordinance to help litigants in cheque bounce cases

The Union cabinet recently cleared an ordinance which would help lakhs of persons battling cheque bounce cases far away from their place.

  • This is the 14th ordinance of the Modi government in a little over a year.

In view of the urgency to create a suitable legal framework for determination of the place of jurisdiction for trying cases of dishonour of cheques under section 138 of the Negotiable Instruments Act, the Government has decided to amend the law through the Negotiable instruments (Amendment) Ordinance, 2015.

The Negotiable Instruments (Amendment) Ordinance, 2015:

  • The ordinance will amend the Negotiable Instruments Act, 1881.
  • It will enable filing of cheque bounce cases in the place where the cheque was presented for clearance or payment and not the place of issue. It provides for filing of cases only by a court within whose local jurisdiction the bank branch of the payee, where the payee delivers the cheque for payment is situated.
  • It has been provided that if more than one prosecution is filed against the same drawer of cheques before different courts, upon the said fact having been brought to the notice of the court, the court shall transfer the case to the court having jurisdiction as per the new scheme of jurisdiction.
  • The main objective of the ordinance is to ensure that a fair trial is conducted keeping in view the interests of the complainant by clarifying the territorial jurisdiction for trying the cases for dishonour of cheques.

The Supreme Court, in 2014, had passed a judgment that if a cheque was received from someone and it bounces, then the jurisdiction for initiating action lies in the State where it was issued. However, this judgment was not payee-friendly and hence the government had to come out with this solution.


  • The clarification of jurisdictional issues may be desirable from the equity point of view as this would be in the interests of the complainant and would also ensure a fair trial.
  • The clarity on jurisdictional issue for trying the cases of cheque bouncing would increase the credibility of the cheque as a financial instrument.
  • This would help the trade and commerce in general and allow the lending institution, including banks, to continue to extend financing to the economy, without the apprehension of the loan default on account of bouncing of a cheque.

Section 138 of the NI Act:

  • The Section 138 of the NI Act deals with the offence pertaining to dishonour of cheque for insufficiency, etc., of funds in the drawers account on which the cheque is drawn for the discharge of any legally enforceable debt or other liability.
  • It provides for penalties in case of dishonour of cheques due to insufficiency of funds in the account of the drawer of the cheque.

The object of the NI Act is to encourage the usage of cheque and enhancing the credibility of the instrument so that the normal business transactions and settlement of liabilities could be ensured.

The Negotiable Instruments (Amendment) Bill, 2015 was introduced in Lok Sabha in May, 2015 and was passed by Lok Sabha. However, since the Rajya Sabha was adjourned sine die on 13th May, 2015, the Bill could not be discussed and passed by that House and the Bill could not be enacted.

Sources: The Hindu, PIB, BS.


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