Negotiable Instruments (Amendment) Second Ordinance issued on 22 September for cheque dishonour jurisdiction

On 22 September 2015, the President of India has promulgated a new ordinance, namely, the Negotiable Instruments (Amendment) Second Ordinance, 2015, which shall be deemed to have come into existence with effect from 15 June 2015, i.e., the date from which the first such Ordinance had come into effect. This will ensure continuity from the first such ordinance issued on 15 June 2015. This means that the period from 31 August 2015 to 22 September 2015, during which there was no such Ordinance in operation, shall also be deemed to have been covered under this new Ordinance issued on 22 September 2015 (see: Lapsing of Negotiable Instruments (Amendment) Ordinance 2015 causes uncertainty in cheque bounce cases).

The provisions of this new Ordinance lay down as to where (i.e., in which court) a cheque dishonour case is required to be filed and also about the transfer of the existing cheque bounce cases registered under Section 138 of the Negotiable Instruments Act, 1881. The provisions under the new Ordinance are the same as under the first such ordinance issued on 15 June 2015 (see: Jurisdiction in cheque bouncing cases is changed by new Ordinance, superseding SC judgment).

This means that the jurisdiction of filing cheque dishonour cases under Section 138 of the N.I. Act will now be governed by the provisions of this new Ordinance as under:

  • Now a cheque bouncing case can be filed only in the court at the place where the bank in which the payee has account is located. For example, if you are based at Delhi and you have an account in a bank in a particular area of Delhi. You receive a cheque from someone in Mumbai. You present your cheque in Delhi in the bank where you have your account. Now, if this cheque is dishonoured, then the cheque bounce case can be filed only in Delhi in the court which has jurisdiction over the area where your bank is located.
  • Secondly, once you have filed a cheque bounce case in one particular court at a place in this manner, subsequently if there is any other cheque of the same party (drawer) which has also bounced, then all such subsequent cheque bounce cases against the same drawer will also have to filed in the same court (even if you present them in some bank in some other city or area). This will ensure that the drawer of cheques is not harassed by filing multiple cheque bounce cases at different locations. So, even multiple cheque bounce cases against the same party can be filed only in one court even if you present the cheques in different banks at different locations.
  • Thirdly, all cheque bounce cases which are pending as on 15 June 2015 in different courts in India, will be transferred to the court which has jurisdiction to try such case in the manner mentioned above, i.e., such pending cases will be transferred to the court which has jurisdiction over the place where the bank of the payee is located. If there are multiple cheque bounce cases pending between the same parties as on 15 June 2015, then all such multiple cases will be transferred to the court where the first case has jurisdiction as per above principle.

The new Ordinance specifically mentions that the first such ordinance came into existence with effect from 15 June 2015, that the Bill to replace this first ordinance has been passed by the Lok Sabha but it is still pending before the Rajya Sabha, and that the Parliament is not in session due to which it is necessary to promulgate this new Ordinance.

Though the Government has delayed this new Ordinance by about 22 days, it is expected to bring some clarity on the issue of territorial jurisdiction for filing cheque bouncing cases under Section 138 of the N.I. Act.

See, our full coverage on the cheque dishonour cases:

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