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The Narendra Modi government Check Bounce Rules decided to come out with another ordinance – its 14th in just over a year – to enable harassed victims in cheque bouncing cases to file a suit against the errant individuals and entities in the place where the cheque was presented for encashment.
The ordinance seeks to amend the Negotiable Instruments Act Check Bounce Rules overturn a judgment issued by a three-judge bench of the Supreme Court last August that ruled “the place, situs or venue of judicial inquiry and trial of the offence must logically be restricted to where the drawee bank is located”.
The Supreme Court verdict meant that the victims of cheque-bouncing cases — the government estimates the number at more than 18 lakh – faced the daunting prospect of having to making endless trips to the city or town housing the bank branch that had dishonoured the cheque in order to fight the case.
The ordinance will in effect negate the ruling of Justices Vikramjit Sen, T.S. Thakur and C. Nagappan of the apex court.
There are five separate actions that lead up to a cheque bouncing case. These are: (1) Drawing of the cheque, (2) Presentation of the cheque to the bank, (3) Returning the cheque unpaid by the drawee bank, (4) Giving notice in writing to the drawer of the cheque demanding payment of the amount within 30 days of the dishonouring of the cheque, and (5) Failure of the drawer to make payment within 15 days of the receipt of the notice.
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Last year, Check Bounce Rules In The Supreme Court bench had said: “We clarify that the place of the issuance or delivery of the statutory notice or where the complainant chooses to present the cheque for encashment by his bank are not relevant for purposes of territorial jurisdiction of the complaints.”
The three-member bench had actually overturned an earlier apex court ruling – the so-called Bhaskaran ruling delivered in 1999 – which allowed the victims to file cases in a magistrate’s court in any court having jurisdiction over the local areas where the five different actions took place.
While doing so, Justices Sen had said: “The conclusion in Bhaskaran was influenced in large measure by curial compassion towards the unpaid payee/holder, whereas with the passage of two decades the manipulative abuse of territorial jurisdiction has become a recurring and piquant factor.”
In their ruling in 1999, Justices K.T. Thomas and M.B Shah had ruled: “It is not necessary that all the above five acts should have been perpetrated at the same locality. It is possible that each of those five acts could be done at five different localities. If the five different acts were done in five different localities, any one of the courts exercising jurisdiction in one of the five local areas can become the place of trial for the offence under Section 138 of the (Negotiable Instruments) Act.”
The Modi government’s ordinance will, in effect, revert to the position that existed post the Bhaskaran ruling.
The ordinance was brought as the amendment bill, which was passed by the lower House earlier this year, could not be passed in the Rajya Sabha due to the paucity of time.
The Union cabinet’s decision has been widely welcomed.
“This was a problem for many of my clients whose cheque payments from big outstation firms bounced. They had to travel several times to a court in a different city to pursue the case adding to the cost of litigation,” said Sudatta Sen, a chartered accountant.
Said Sandip Ray of New Delhi-based Merx Exponaire, an industrial design firm: “I had to travel several times to Hyderabad to follow up a bounced cheque case against a firm for whom we had done some work here. The cheque had been issued by their head office… it was a ridiculous situation for me as I ended up spending half of the cheque amount on travel and hotel bills.”
Transport minister Nitin Gadkari, who briefed reporters after the cabinet meeting, said: “There are 18 lakh such cases in various courts. The government had brought a Bill to give relief to harassed litigants. The Rajya Sabha could not pass it. So to give relief to these people, the government has brought this ordinance.”
Earlier, while introducing the bill in the Lok Sabha, Finance Minister Arun Jaitley had said: “To address the difficulties faced by the payee or the lender of the money in filing a case under Section 138 (of the Act), because of which a large number of cases are stuck, the jurisdiction for offence has been clearly defined keeping in view the interest of complainants.”
The Statement of Objects of the bill stated that after apex court ruling last August, various stakeholders including industry associations and financial institutions had made representations to the government expressing concern about the wide impact the judgment would have on business interests. They had argued that the ruling would offer undue protection to defaulters at the expense of the
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