July 27, 2024

The Rajya Sabha has passed a new bill that tweaks the Negotiable Instruments Act, bringing relief to millions of people who accept cheque payments in good faith for goods sold or services rendered, only to find them returned unpaid. The Lok Sabha had earlier passed the bill.

This bill provides that a cheque bouncing case can now be initiated in a court in the place where the branch of the bank of the payee is located. These cases are filed under Sec. 138 of the NI Act if the payee is an individual and Sec. 141 of the same Act against the managing director, if the payee is a limited company. Earlier, such cases were to be filed in the city where the branch of the bank of the issuer was located.

This resulted in huge problems for the creditor company or individual as they had to engage lawyers in a city or town they were not familiar with and had to send a representative with all papers and authority on each date of the case. This caused immense harassment and entailed uncalled for expenditure for people already suffering from non-payment of dues. The Supreme Court had earlier refused to change the law. The current bill was necessitated by the government view that the law needed change.

This is a welcome change that will add teeth to what is generally called the cheque bouncing law – meaning cases filed under Secs. 138 & 141. Previously, despite being at fault, the cheque issuer had the luxury of contesting the case from his own city. It was the payee who had to do all the running around, especially if he was from out of town. Now the shoe will be on the other foot, as it should be.

There are hundreds of reasons why a cheque can bounce. While it is very embarrassing for genuine businessmen when a cheque issued by them gets returned, the issue is amicably settled in most cases by either presenting the cheque once again or by paying cash against the bounced instrument. But it is the unscrupulous traders who cause immense harm to the system.

If a cheque bouncing issue reaches the courts under the above sections, it means that all the avenues of amicable settlement and payment were exhausted. The payer seemed intent on avoiding the payment and hence the payee was forced to file this criminal case. Otherwise, no businessman will ever think of suing a business partner for payment related issues.

Thus, if the intent of the payer is malafide, it makes sense that the payee should be able to file the case from his own city. That way, he can handle the case better and the payer will always think of settling the case early to avoid harassment, expenses and maybe subsequent arrest and hefty fines. The new bill will act as a good deterrent to habitual offenders.