NEGOTIABLE INSTRUMENTS ACT, 18811. The negotiable instruments Act, 1881 was amended by the Banking, Public Financial Institution and Negotiable Instruments Laws (Amendment) Act, 1988 wherein a new Chapter XVII was incorporated for penalties in case of dishonor of cheques due to insufficiency of funds in the account of the drawer of the cheque. These provisions were incorporated with a view to encourage the culture of use of cheques and enhancing the credibility of the instrument. The existing provision in the Negotiable Instrument Act, 1881, namely, sections 138 to 142 in Chapter XVII have been found deficient in dealing with dishonor of cheques. Not only the punishment provided in the Act has proved to be inadequate, the procedure prescribed for the Courts to deal with such matters has been found to be cumbersome. The Courts are unable to dispose of such cases expeditiously in a time bound manner in view of the procedure contained in the Act.
2. A large number of cases are reported to be pending under sections 138 to 142 of the Negotiable Instruments Act in various courts in the country. Keeping in view the large number of complaints under the said Act pending in various courts, a Working Group was constituted to review section 138 of the Negotiable Instruments Act, 1881 and make recommendations as to what changes were needed to effectively achieve the purpose of that section.
3. The recommendations of the Working Group along with other representations from various institution and organizations were examined by the Government in consultation with the Reserve Bank of India and other legal experts, and a Bill, namely, the Negotiable Instruments (Amendment) Bill, 2001 was introduced in the Lok Sabha on 24th July, 2001. The Bill was referred to Standing Committed on Finance which made certain recommendations in its report submitted to Lok Sabha in November, 2001.
4. Keeping in view the recommendations of the Standing Committee on Finance and other representations, it has been decided to bring out, inter alia, the following amendments in the Negotiable Instruments Act, 1881, namely :-
- to increase the punishment as prescribed under the Act from one year to two years;
- to increase the period for issue of notice by the payee to the drawer from 15 days to 30 days;
- to provide discretion to the Court to waive the period of one month, which has been prescribed for taking cognizance of the case under the Act;
- to prescribe procedure for dispensing with preliminary evidence of the complainant;
- to prescribe procedure for servicing of summons to the accused or witness by the Court through speed post or empanelled privates couriers;
- to provide for summary trial of the cases under the Act with a view to speeding up disposal of cases;
- to make the offences under the Act compoundable;
- to exempt those directors from prosecution under section 141 of the Act who are nominated as directors of a company by virtue of their holding any office or employment in the Central Government or State Government or a financial corporation owned or controlled by the Central Government, or the State Government, as the case may be;
- to provide that the Magistrate trying an offence shall have power to pass sentence of imprisonment for a term exceeding one year and amount of fine exceeding five thousand rupees;
- to make the Information Technology Act, 2000 applicable to the Negotiable Instrument Act, 1881 in relation to electronic cheques and truncated cheques subject to such modifications and amendments as the Central Government, in consultation with the Reserve Bank of India, considers necessary for carrying out the purposes of the Act, by notification in the Official Gazette; and
- to amend definitions of "bankers' books" and "certified copy" given in the Bankers' Books Evidence Act, 1891.
5. The proposed amendments in the Act are aimed at early disposal of cases relating to dishonor of cheques, enhancing punishment for offenders, introducing electronic image of a cheque and a cheque in the electronic form as well as exempting an official nominee director from prosecution under the Negotiable Instruments Act, 1881.
6. The Bill seeks to achieve the above objects.