A breif History of and various amendments undergone by the Negotiable instruments Act

A breif History of and various amendments undergone by the Negotiable instruments Act

 

The Negotiable Instruments Bill was originally drafted in 1866 by

the 3rd Indian Law Commission and introduced in December, 1867 in the Council and it was referred to a Select Committee. Objections were raised by the mercantile community to the numerous deviations from the English Law, which it contained. The Bill had to be redrafted in 1877.

After the lapse of a substantial period of time due to criticism by the Local Governments, the High Courts and the Chambers of Commerce, the Bill was revised by a Select Committee. In spite of this, the Bill could not reach the final stage. In 1880 by the Order of the Secretary of State, the Bill had to be referred to a new Law Commission.

On the recommendation of the new Law Commission the Bill was

redrafted and again it was sent to a Select Committee which adopted most of the additions recommended by the new Law Commission. The draft thus prepared for the fourth time was introduced in the Council and was passed into law in 1881 being the Negotiable Instruments Act, 1881 (Act No.26 of 1881).

The Negotiable Instruments Act, 1881, (hereinafter called N.I. Act) was enacted as an attempt to consolidate the law relating to promissory notes, bills of exchange and cheques. The main object of the N.I. Act was to legalize the system by which instruments contemplated by it could pass from hand to hand by negotiation like any other goods. Another purpose of the N.I. Act was to encourage the culture of use of cheques and to enhance the credibility of the instrument.

Following a century of the enactment of the N.I. Act, Sections 138 to 142, Chapter XVII, were inserted in the Act vide Section 4 of the Banking, Public Financial Institutions and Negotiable Instruments Laws

(Amendment) Act, 1988, (Act 66 of 1988). These Sections came into force with effect from 29.3.1989.

The amendments of 2002 have introduced new sections from Section 143 to Section 147 that has widened the scope and diminished the limitation of the parent Act. The introduction of five new sections and the Amendment Act was brought into force on Feb 6, 2002.

Prior of the Dasrath Rupsingh Rathod’s case, the question of

Territorial Jurisdiction was considered by the Hon'ble Supreme Court in K.Bhaskaran vs. SankaranVaidhyanBalan&Anr. AIR 1999 SC3762 wherein the Hon'ble Supreme Court after duly considering Sections 177, 178 & 179 of the Criminal Procedure Code, held that the Territorial Jurisdiction in cases of Section 138 of the NI Act, could be made out on 5 considerations, which are as follows:

(a) Drawing of the cheque

(b) Presentation of the cheque to the bank

(c) Returning the cheque unpaid by the drawee bank

(d) Giving notice in writing to the Drawer of the Cheque

demanding payment of the cheque amount

(e) Failure of the Drawer to make payment within 15

days of receipt of the Notice

Thereafter, the Hon'ble Supreme Court in the case of Dasrath

Rupsingh Rathod’s ((2014) 9 SCC 129) changed the concept of Territorial Jurisdiction for dishonor of cheques and limited it only to those Courts, within whose local jurisdiction the offence was committed, i.e., where the cheque is dishonored by the bank on which it is drawn.

The Negotiable Instruments (Amendment) Act, 2015 is focused on clarifying the jurisdiction related issues for filing cases for offence committed under section 138 of the Negotiable Instruments Act, 1881.

Finally, Section 142(2) introduced.