Case Law

By Archana Dadhich

Senior Corporate Lawyer

The Parliament accorded its consent to the Negotiable Instruments (Amendment) Bill 2018 which amended the 1881 bill. The amended bill specifies the penalties in respect of bouncing of cheques, violations of such negotiable instruments.

The amendment has been proposed to help trade and commerce, particularly the micro, small and medium enterprises (MSME) sector, and in order to increase the credibility of the cheque as a financial instrument.

As per the amendment, a new provision Sec.143A of the Act was introduced. The introduction of this section gives the power to the Court to order payment of compensation by the drawer of the cheque to the complainant. Interim compensation not exceeding 20% of the cheque amount may be ordered to be paid The interim compensation has to be paid within 60 days of the order or within such further period not exceeding 30 days as directed by the Court on sufficient show cause being shown by the drawer of the cheque. The interim compensation may be recovered as if it were a fine under Sec. 421 of the Code of Criminal Procedure 1973.

Sec.148 was also introduced vide the said amendment, wherein the court can direct the appellant to deposit a minimum of 20% of the cheque in appeal by the drawer against conviction. This amount shall be in addition to the interim compensation paid under Sec. 143A. The interim compensation is to be paid by the drawer of the dishonoured cheque in a summary trial or a summons case. It is applicable even if he pleads not guilty to the charge made in the complaint.

Thereafter, if the drawer is acquitted during the trial by the Court, the Court shall direct the complainant to return the interim compensation along with interest within 60 days of the order or such other period not exceeding 30 days.

The Government has held that the main intention to introduce the amendment was to address the “delay tactics of unscrupulous drawers of dishonor cheques and to discourage frivolous and unnecessary litigation which would save time and money”.


The provisions of interim compensation and condition in making appeals will not only act as a deterrent against the drawer of the cheque but will also give some relaxation to the payee in terms of realizing his money. But, the bill has made the provision of deposit of 20% of the amount of cheque immediately, without considering the cases where the dishonor of cheque might have not been caused deliberately. Further, these provisions may not suffice while dealing with the delay in cases of cheque bounce. It is important that the bill entails a provision to dispose of the cases in a time bound manner. For this the courts should not grant adjournments liberally and efforts should be made to complete evidence and cross examination on the same day. Summons should be sent through electronic medium etc so that drawers cannot get the opportunity to dodge the summons sent by post. Apart from this sufficient infrastructure should be developed with the courts to deal with the cases. As the government pushes for a cashless economy, it is important to deal with the menace in a comprehensive manner.