The Negotiable Instruments Act, 1881 (the Act) was enacted to characterize and define the law relating to authoritative records like Promissory Notes, Bills of Exchange and Cheques. Over the years, the Act has undergone amendments to deal with the changing times, keeping in view the common goal of rapid disposal of cases identifying with the offence of dishonor of cheques. However, the pendency ratio of cheque dishonor cases still remains a critical issue and adversely affects the cash flows of businesses particularly Small & Medium sized Enterprises (SMEs).

It is observed that one of the main reasons that plagues the system, roots down to the malafide strategies of corrupt drawers of dishonored cheques towards evading and abusing the process of law, eventually harming the innocent payees of the dishonored cheques.

With a view to curb such practices, the Lok Sabha passed Negotiable Instruments (Amendment) Bill, 2017 on July 23, 2018, Rajya Sabha passed the Bill on July 26, 2018 and subsequently the Negotiable Instruments (Amendment) Act, 2018 (“Amendment Act) was notified on August 02, 2018. The amended provisions introduced are likely to contribute towards reducing the number of cheque bounce cases pending in the courts. This will provide immediate relief to the payees of dishonored cheques, the disposal of which consumes considerable time and resources.


  • Section 143A has been inserted which essentially empowers the court trying the offence under Section 138 of the Act, to direct the drawer of the cheque to pay interim compensation to the Payee in situations of a summary trial or summons case wherein the drawer pleads to be “not guilty”.
  • Another provision introduced as Section 148 specifies that in case the drawer files an appeal against his/her conviction, the Appellate court has the power to direct the drawer to deposit a minimum amount of 20% of the fine or compensation that was awarded by the Trial court. This amount shall be in addition to the compensation paid at the trial stage.
  • The interim compensation at the trial as well as the deposit amount at the appellate stage (as the case may be) shall be paid within 60 days from the date of the order by the court trying the offence or the appeal.
  • In case of acquittal of the drawer/ appellant by the Trial Court or the Appellate Court, (as the case may be) the payee/complainant shall be directed to repay the interim compensation or amount deposited (as maybe applicable), to the drawer/appellant along with such interest as may be fixed by Reserve Bank of India at the beginning of the relevant financial year. This amount shall be repaid within 60 days of the court’s order.

The present Amendment is aimed to reduce the pendency ratio of cheque bounce cases and appears to be a step taken towards improvement in the current scenario. The amended provisions could pave the way towards enhancing the trade and commerce industry and allowing various lending institutions to promote and stimulate finances in the economy.

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