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Cheque bounce ordinance to have retrospective effect

This ordinance–issued on June 15—has made it clear that all pending cheque bounce cases should be transferred to the jurisdictional court where the cheque is presented.

This move to bring all pending cases under the jurisdiction mentioned in the ordinance augurs well for recovery of loans/advances, say representatives of the asset financing non banking finance companies (NBFCs).

“It will send the right message to defaulting borrowers. The law has to be on the side of the person who is suffering (lender unable to recover his money)”, Raman Aggarwal, Director, Finance Industry Development Council, told Business Line here.

This ordinance is a step in the right direction as the entire system is now looking at early signals of stress and taking early remedial action rather than waiting for asset to turn into a non-performing asset and then take an action, he said.

FIDC is a self regulatory organisation representing asset financing NBFCs.

This ordinance is a big relief and a welcome development for all as it shall not only clear the confusion created by the Supreme Court order but also enable banks and NBFCs to use Sec 138 effectively, sources in the banking industry said.

The apex court ruling was given in the context of traditional method of cheque clearance where the cheque (instrument) physically travels from the bank branch where it is presented to the drawee bank branch. In such cases, the dishonour of cheque happens at the place where the drawee bank branch is located.

However, this ruling posed difficulties in the case of modern day system of cheque clearance under the cheque truncation system, where the cheque does not travel to the drawee bank branch.

The Government had recently taken the ordinance route to fast track resolution of cheque bounce cases.

The ordinance had said that all cheque-bounce cases can be filed only in a court within whose local jurisdiction the bank branch of the payee is situated, and where the payee presents the cheque for payment.

This had in a way addressed the difficulties arising out of Supreme Court 2014 judgment in the Dashrath Rupsingh Rathod versus State of Maharashtra case.

In its ruling dated August 1, 2014, the apex court ruled that an offence under Section 138 of the Negotiable Instrument Act is committed the moment there is dishonour of cheque.

The Apex Court also held that the place where the crime is committed shall determine the jurisdiction of the concerned court. As such it is the place where the dishonour of cheque occurs that will determine the jurisdiction for filing criminal case under Section 138.

Cheque bounce ordinance to have retrospective effect

Cheque bounce ordinance to have retrospective effect

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