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Recent amendments in NI Act of awarding interim compensation and deposit of money in Appellate Court strengthens ease of doing business in India

During the late 1980s, The Negotiable Instruments Act, 1881 was amended by the Banking, Public Financial Institutions and Negotiable Instruments Laws (Amendment) Act, 1988

Recent amendments to the Negotiable Instruments Act, 1881 with respect to award of interim compensation to payee of the cheque and directions to deposit a part of compensation amount by the drawer of cheque before Appellate Court: A step forward in ease of doing business in India.

During the late 1980s, The Negotiable Instruments Act, 1881 was amended by the Banking, Public Financial Institutions and Negotiable Instruments Laws (Amendment) Act, 1988 wherein a new Chapter XVII was incorporated for penalties in case of dishonour 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. By the above amendments, the Dishonour of cheque was made a criminal offence, by fixing criminal liability on the drawer of the cheque.

The basic idea of introducing the aforesaid amendment was to make sure that the defaulter is held accountable for his actions in a criminal trial if there was an intention to defraud. The purpose was to fix some kind of responsibility on the drawer of the cheque and seriousness for issuing the cheque. Later on the provisions stands amended and the dishonor of cheque for signature mismatch and stop payment was also covered.

But after almost three decades of introducing the amendment and making the dishonor of cheque, criminal offence, it was observed that the cheque bounce cases are being treated as of other civil disputes. As of late it was being observed that the cheque bounce criminal trials is losing its creditability.

 The making of payments through cheques plays a pivotal role in the commercial transactions. Though other modes of payments are prevalent but still the mode of payment through cheque is most prevalent.

The Negotiable Instruments Act 1881 has been amended from time to time so as to provide, inter alia, speedy disposal of cases relating to the offence of dishonour of cheques. But inspite of that the Central Govt was receiving several representations from the public, including the trading community, relating to the pendency of cheque bounce cases. The same may be imputed to the delay tactics adopted by unscrupulous drawers of the dishonored cheques on account of ease of filing Appeals and obtaining stay on the proceedings. Such delays compromised the sanctity of the cheque transactions.

In order to address the above issues, it was proposed to amend the said Act with a view to address the issue of undue delay in final resolution of cheque dishonour cases so as to provide relief to payees of dishonoured cheques and to discourage frivolous and unnecessary litigation which would save time and money. It was stated that proposed amendments will strengthen the credibility of cheques and help trade and commerce in general by allowing lending institutions, including banks, to continue to extend financing to the productive sectors of the economy.

In order to strengthen the ease of doing business in India, the parliament passed the Negotiable Instruments (Amendment) Act 1881 and thereby inserted/introduced following two provisions: -

Section- 143A

With the amendment, the new provision entitles any Court while trying a cheque dishonour offence, to order the drawer of the cheque to pay interim compensation to the complainant, where the drawer pleads not guilty to the accusation made in the complaint and in any other case, upon framing of charge. The provision further stated that the interim compensation shall not exceed twenty percent of the amount of the cheque and it was also provided for that this interim compensation has to be paid within a prescribed time period of 60 days from the date of the passing of the Order by the Court, or within the extended period of 30 days, if allowed/ directed by the Court on justifying significant cause for the delay in payment.

It has been specifically provided in the amended provision that if the drawer of the cheque is acquitted, the Court shall direct the complainant to repay to the drawer, the amount of interim compensation, with interest at the bank rate as published by the Reserve Bank of India, prevalent at the beginning of the relevant financial year, within sixty days from the date of the order, or within such further period not exceeding thirty days as may be directed by the Court on showing sufficient cause.

Further it has been provided that the interim compensation payable under this section may be recovered as if it were a fine under section 421 of the CrPC 1973. Later on the amount of fine imposed under section 138 or the amount of compensation awarded under section 357 of the CrPc, shall be reduced by the amount paid or recovered as interim compensation.

But Section 143 is not made applicable retrospectively.

Section- 148

The amendment inserted a new section that is section 148 and stated that in case of an Appeal filed by the drawer against conviction under section 138, the Appellate Court may order the Appellant to deposit such sum which shall be minimum of twenty percent of the fine or the total compensation awarded by the trial Court. The provision further stated that the amount payable shall be in addition to any interim compensation paid by the Appellant under section 143A.

Further the provision stated that the above amount shall be deposited within sixty days of the date of order or within such further period not exceeding thirty days as may be directed by the Court on sufficient cause being shown by the Appellant. The Appellate Court has been further given the power to release the said amount in favour of the Complainant at any time during the pendency of the Appeal. However, if the defaulter/Appellant is acquitted from the offence, then the Court instruct the complainant to repay the amount to the Appellant.

The Hon’ble Supreme Court of India in a recent judgement titled Surinder Singh Deswal vs Virender Gandhi MANU/SC/0793/2019 has held that “Therefore irrespective of the provisions of Section 357(2) of the Code of Criminal Procedure, pending appeal before the first appellate court, challenging the order of conviction and sentence under Section 138 of the N.I. Act, the Appellate Court is conferred with the power to direct the Appellant to deposit such sum pending appeal which shall be a minimum of 20% of the fine or

compensation awarded by the trial Court”. The Hon’ble Supreme court further held thatthough it is true that in amended Section 148 of the N.I. Act, the word used is "may", it is generally to be construed as a "rule" or "shall" and not to direct to deposit by the appellate court is an exception for which special reasons are to be assigned.”

The Hon’ble High Court of Punjab & Haryana in Ginni Garments & Anr. v/s Sethi Garment & Anr.  has held that Section 143-A has no retrospective effect while Section- 148 only applies to the pending appeals on date of enactment of the new amendment.


The indicial Judicial system is facing huge backlog of cases and as per the 213th Law Commission Report, about 20% of the case relating to litigation, pertains to cheque bounce. So the newly introduced provisions would give some life into the dead provisions of the Negotiable Instruments Act 1881. No doubt the cheque offence cases are penal in nature and bring home criminal offence, but still the provisions of summary trial is on papers and further making the offence bailable has made the cheque bounces cases, almost similar to civil disputes. In that way, newly introduced provisions would indeed a proactive step towards safeguarding the credibility of cheques.

Once the accused persons/drawer of cheques or in case of Appeal, Appellant/drawer of cheques, deposit a considerable amount, then they would take the matters seriously.

Though it is a positive direction in the cheque offence cases, but still more is to be done, to make the cheque bounce cases practical and summary trial has to be given its true meaning, otherwise the whole purpose behind introducing cheque bounce a criminal offence would lost its importance.


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