Negotiable Instruments (Amendment) Bill, 2017

Negotiable Instruments (Amendment) Bill, 2017 has been introduced in Lok Sabha on January 2, 2018. This bill seeks to amend the Negotiable Instruments Act, 1881 to primarily address the issues of dishonor of cheques and deal with unnecessary delay in disposal of such cases.

Current Status
  • Introduced in Lok Sabha. {January 2, 2018}

Negotiable Instrument

Negotiable instrument refers to any legal documents like cheques, promissory notes, bill of exchange etc which promises to pay the bearer/holder of the instrument or the person whose name is written on the instrument a specific amount of money either on demand or after a specified time i.e. on some future date.

Cheque is defined in Section 6 of the negotiable instruments act. A cheque has three main parties viz. Drawer (maker of the cheque); Drawee (person thereby directed to pay. for cheques, it is bank); and Payee (the person named in the instrument, to whom the money is to be paid).

Background and Previous Amendments

Section 138 of the negotiable instruments act, 1881 deals with the dishonor of cheques. The cheque is deemed to be dishonored in 3 conditions-

  • Due to insufficiency of funds in the accounts
  • Issuance of stop payment instructions by the drawer to the bank
  • Amount of cheque exceeding the arrangement with the drawer bank.

Prior to 1988, in case when a cheque was not honored on presentment, the only remedy available under the Act was to file a civil suit in the court against the offender. However, this remedy did not have a desired deterrent effect on offenders and cheques started losing their credibility. Hence, the Act was amended several times to incorporate more stringent provisions to deal with dishonor.

  • In the 1988 amendment, the dishonor of cheques was made a criminal liability and offenders were liable to be punished by imprisonment for a term which may extend to one year, or with fine which may extend to twice the amount of the cheque, or with both.
  • The 2002 amendment of the same law further extended the term of imprisonment to up to two years.

Despite incorporating such stringent provisions the incidences of dishonor of cheque has not been reduced and consequently there is large pendency of cases related to dishonor of cheque. It takes minimum 4 to 5 years to dispose of the cases related to cheque dishonor. A look at the below table can explain the scenario.

The drawers resort to delay by frequent appeals and getting stay on proceedings. Thus, they end up holding back the payment for five to six years causing unnecessary harassment and waste of time and cost of the payee. Apart from materialistic disadvantages, such inordinate delay also erodes the faith of the people in the sanctity of the cheque transactions, thereby, questioning its credibility in terms of resources spent to realize its value. Moreover, it also affects the trade and other economic activities in the country. These problems necessitated to bring amendments in the NI act 1881 so that the injustice done to the payee can be minimized and his faith in using cheque as a credible instrument remains intact.

The 2017 Amendment of NI Act: Key Provisions

Following are the main provisions of the recently introduced bill:

  • A new Section 143 A has been inserted which will allow the courts to order the drawer of the cheque to pay interim compensationto the complainant.
  • The interim compensation should not exceed 20 percent of the amount of the cheque, and will have to be paid by the drawer within 60 days of the trial court’s order to pay such compensation.
  • If the drawer is acquitted, the court may direct the payee to repay the amount paid as interim compensation with interest.
  • Another new Section 148-A says that in case of appeal by drawer against conviction, the Appellate Court may direct the appellant to deposit 20 per cent of the compensation awarded by the trial court.


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.