Negotiable Instrument (Amendment) Act, 2018: Scrutiny of applicability and post-
COVID-19 outbreak
The parliament has recently introduced a bill on Negotiable Instrument (Amendment)bill
2017 on January 2, 2018. Later it was enacted as an act called The Negotiable Instruments
(Amendment) Act, 2018 after it was passed by the both houses of the parliament and it came
to an effect from September 1, 2018. As per the 213th Law Commission Report, there are
about 40 lakh cheque bounce cases. On 20th June 2018,Justice Adarsh Kumar Goel noticed
that most of the lower Courts are dealing more than 20 per cent of the cheque bounced case.
This specific amendment’s particularly focus on the law relating to the authoritative records
like Promissory Notes, Bills of Exchange and Cheques and also to prevent the violation of
law regarding the Dishonored cheques. This amendment furnishes instant relief to the payees
of dishonoured cheques, the disposal of which consumes considerable time and resources.
Applicability:
The Parliament has enacted negotiable instrument (amendment) act 2018 by introducing two
major section i.e section 143 A and 148. This section provides interim compensation to the
complainant even before the issuer is guilty.
This section empowers the magistrate to direct the issuer to pay the interim compensation
which shall not exceed 20%percent of the total amount of cheque when he/she pleads not
guilty or during the framing of charge. This interim compensation may extend further 20% in
case of any appeal. This amendment also ensure the protection of issuer by refunding the
entire interim compensation if the case is dismissed or the issuer gets acquitted from the
proceedings.
This amendment assure the protection of both the complainant as well as the Innocent issuer
of the cheques by enacting specific provisions. The interim compensation is to be considered
as the fine under section 421 of criminal procedure code 1873. At the same time the final
compensation will be given only after the deduction of the interim compensation which was
paid by the issuers to the complainant.
Retrospective or Prospective effect:
After the amendment, the most prominent question arises whether section 143 A was
prospective or retrospective in nature. The same question has been dealt by the Supreme
Court in the case “GJ. Raja Vs. Tejraj Surana1. In this case, the court observed that the
Section 143 A has two facet. At First, the section empowers the court can direct the drawer to
pay the interim compensation to the complainant which is not more than 20% percent of the
total amount of cheques during the pendency of the case. In other aspects the court find that
the Section 143A paves way for the recovery of money considering interim compensation as
1 2019 SCC Online SC 989
the arrears of the land revenue. Therefore, court has come to the conclusion that the section
143 A should be prospective in nature.
1. SECTION 148: While dealing with the case of Surinder Singh Deshwal @ Col. S.S.
Deshwal & Ors. Vs. Virender Gandhi2 where appeals were filed against a common
judgment of the Punjab and Haryana High Court dated 10.09.2019 dismissing 28 petitions
filed by the appellants under Section 482 of Cr.P.C, the Apex Court observed that the
object and purpose of the enactment of Section 138 of the NI Act was being frustrated
because of the delay tactics of drawers of dishonoured cheques by filing of appeals and
obtaining stay on proceedings which led to the Parliament to amend Section 148 of the NI
Act. It was further observed that the amendment in Section 148 does not take away and/or
affect any vested right of appeal of the appellants. The Court held that if such a purposive
interpretation is not adopted then the objective and purpose of Section 148 would be
frustrated. The Supreme Court has clarified that the Section 148 of the Amendment Act,
shall have a retrospective effect.
2. Why is section 143A prospective and section 148 is retrospective? : The Court noticed 3
that Section 143A of the Amendment Act applies at the trial stage that is even before the
pronouncement of guilt or order of conviction. Whereas, Section 148 of the NI Act applies
at the appellate stage, where the accused is already found guilty of the offence under
Section 138 of the NI Act. The Court also pointed out that there is no provision in Section
148 of the NI Act which is similar to Sub-Section (5) of section 143A of the Act.
However, as a matter of fact, no such provision akin to Sub-section (5) of Section 143A
was required as Sections 421 and 357 of the Cr.P.C., which apply post-conviction, are
adequate to take care of such requirements. In that sense said Section 148 depends upon
the existing machinery and principles already in existence and does not create any fresh
disability of the nature similar to that created by Section 143A of the NI Act.
Remarks: It is indeed a good attempt by the Legislature to provide some solace to the
recipients of cheques, who get stuck in the long-drawn litigation battles affecting the
credibility of the cheques (especially post-dated cheques) in their commercial activities.
Although the percentage of interim compensation to be awarded is low, it is good to see that
the Government has finally been able to address the problems faced by holders of cheques.
Effect of COVID-19: The government is looking to reclassify several offences under
financial sector laws, including the bouncing of cheques, as civil offences rather than criminal
ones to improve the ease of doing business and unclog the courts. These will then be
punishable only by monetary penalties, not jail time. The Department of Financial Services
has sought public comments on decriminalising 39 sections in 19 acts under its administrative
purview including the Banking Regulation Act, the Reserve Bank of India (RBI) Act, the
Insurance Act and the Negotiable Instruments Act.
2
2019 11 SCC 341
3
2019 SCC Online SC 989
The government has said that the ensuing uncertainty in legal processes and the time taken for
resolution in the courts hurts ease of doing business. It said criminal penalties, including
imprisonment for minor offences, act as deterrents but are perceived as being among the
major reasons impacting business sentiment and hindering investment both from domestic
and foreign investors, seen as critical in the wake of the Covid-19 outbreak. Improving ease
of doing business has been one of the Centre’s prime aspirations.
