Interim compensation for bounced cheques

LEGAL RECOURSE AGAINST DISHONOURED CHEQUES IS LONG DRAWN AS IT IS RELATIVELY EASY TO FILE APPEALS AND OBTAIN A STAY ON PROCEEDINGS

NEWDELHI: The Union Cabinet on Friday cleared draft amendments in the Negotiable Instruments Act, 1881, that could award interim compensation in cases relating to dishonoured cheques, both at the trial and appellate stages.

The changes would enable a trial court to order payment of a part of the cheque amount as interim compensation to the receiver. If the drawer is acquitted, the court may direct the receiver to repay the amount paid as interim compensation with interest. Similar provisions would be enabled in case of appeals.

“Dishonour of cheques due to inadequate funds in the account of the drawer of the cheque or for other reasons causes serious distress in the trade, business and MSME sectors. It causes incalculable loss and inconvenience to payees and erodes the credibility of cheques to a large extent,” said a government official in the know of the matter, who refused to be named. The proposed changes will be placed before the winter session of Parliament, the official said. The changes are meant to address various representations from the public and the trading community.

Legal recourse against dishonoured cheques is long drawn as it is relatively easy to file appeals and obtain a stay on proceedings. A receiver of a dishonoured cheque has to spend considerable time and resources in court proceedings to realize the value of the cheque.

“Such delays compromise the sanctity of the cheque transactions,” said the official quoted above.

Cheques are an integral part of the payments system, and form the backbone of trade, which often serve as the security for underlying trade transactions.