Benefits of Negotiable Instruments (Amendment) Ordinance 2015

Benefits of Negotiable Instruments (Amendment) Ordinance 2015

Question: The Union Cabinet has approved the promulgation of Negotiable Instruments (Amendment) Ordinance, 2015. Discuss the key benefits of this ordinance necessitating its passage.

• Proposed amendments to Negotiable Instruments, 1881 has focused on clarification of jurisdiction pertaining to issues for filing cases for offences committed under S138 of the NI Act

• Clarification of jurisdictional issues is ideal from the equity viewpoint

• It is in the interests of the complainant

• It will also ensure fair trial

• It will increase the credibility of the cheque as a financial instrument

• It will help trade and commerce and allow lending banks to extend financing to the economy

• This will ensure financing without apprehension of loan default on account of a bouncing cheque

• This will also facilitate normal business transactions and settlement of liabilities

• Numerous financial institutions and industry associations will be benefited by this ordinance

• It also addresses the difficulties faced by the Payee or Lender of the money in filing a case under S138 of the NI Act

The Bill provides for the following conveniences:

- 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.

- When 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 against the same drawer shall be filed before the same court, regardless of whether those cheques were presented for payment inside the territorial jurisdiction of that court.

- If more than one prosecution is filed against the same drawer of cheques in front of different courts, the courts shall transfer the case to court possessing jurisdiction under the new scheme when it is brought to their notice

Facts and Stats

• Section 138 of the NI Act concerns offence pertaining to dishonour of cheque for insufficiency of funds in drawer’s account on which cheque is drawn for discharge of legally enforceable debt or liability

• This section provides penalties in case of cheque bouncing due to insufficiency of funds

• The Ordinance matches the Bill whereby determination of the jurisdiction of the cases under section 138 of the NI Act are identical, except that that two distinct situations:

- Payment of cheque by submitting the same for collection through an account
Payment of a cheque otherwise through an account, that is, when cheques are given across the counter of any branch of drawee bank for payment
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