Negotiable Instrument Act, 1881 - Blog



The Supreme Court in its judgement dated 1st Day of August 2014, in the case of Dashrath Rupsingh Rathod vs. State of Maharashtra and another it was held that, the territorial jurisdiction for dishonour of cheques is restricted to the court within whose local jurisdiction the offence was committed, which in the present context is where the cheque is dishonoured by the bank on which it is drawn.

Thus, pursuant to the judgement of the Hon'ble Supreme Court various representations have been made to the Government by various stake holders, industry associations, financial institutions expressing concerns about the wide impact this judgement would have on the business interests as it will offer undue protection to defaulters at the expense of the aggrieved complainant.

To address the difficulties faced by the payee or the lender of the money in filing the case under section 138 of the said Act, because of which, large number of cases are stuck, the jurisdiction for offence under section 138 has been clearly defined.

The Negotiable Instruments (Amendment) Bill, 2015 provides for the following, namely:


    i.       filing of cases only by a court within whose local jurisdiction the bank branch of the payee, where the payee presents the cheque for payment, is situated;

  ii.       stipulating that where a complaint has been filed against the drawer of a cheque in the court having jurisdiction under the new scheme of jurisdiction, all subsequent complaints arising out of section 138 of the said Act against the same drawer shall be filed before the same court, irrespective of whether those cheques were presented for payment within the territorial jurisdiction of that court;

  iii.       stipulating 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; and

  iv.       amending Explanation I under section 6 of the said Act relating to the meaning of expression "a cheque in the electronic form”, as the said meaning is found to be deficient because it presumes drawing of a physical cheque, which is not the objective in preparing "a cheque in the electronic form” and inserting a new Explanation III in the said section giving reference of the expressions contained in the Information Technology Act, 2000.

Accordingly, the Negotiable Instruments (Amendment) Bill, 2015 ("the Bill") in Parliament was introduced in Lok Sabha on 6th May, 2015 and considered and passed by Lok Sabha on 13th May, 2015. 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.

However, on 15th Day of June 2015 The Negotiable Instruments (Amendment) Ordinance, 2015 was promulgated by the Hon'ble President of India. The Negotiable Instruments (Amendement) Bill, 2015  has been passed by the House of People and is pending in the Council of States; Parliament is not in session and thus  the President is satisfied that there exists some circumstances which render it necessary for him to take immediate action and thus promulgated an Ordinance under Article 123(1) of Constitution of India amending Section 6 and Section 142 of Negotiable Instrument Act.


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