The union cabinet on Wednesday decided to promulgate an ordinance to amend the Negotiable Instruments Act to provide for filing of cases about dud cheques at places where these are presented.
"The cabinet has given its approval for the proposal to promulgate the Negotiable Instruments (Amendment) Ordinance, 2015," an official release said.
It said that the proposed amendments to the Negotiable Instruments Act, 1881 ("The NI Act") were focused on clarifying the jurisdiction related issues for filing cases for offence committed under section 138 of the Act.
"The clarification of jurisdictional issues may be desirable as this would be in the interests of the complainant and would also ensure a fair trial," the release said.
It said that clarity on jurisdictional issue for cases of cheque bouncing would increase the credibility of the cheque as a financial instrument.
"This would help the trade and commerce in general and allow the lending institution, including banks, to continue to extend finance to the economy, without the apprehension of the loan default on account of bouncing of a cheque," the release said.
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Section 138 of the NI Act deals with the offences related to dishonour of cheque for insufficiency of funds in the drawer's account.
The release said that various financial institutions and industry associations have expressed difficulties due to recent legal interpretation by the Supreme Court of the place of jurisdiction for filing cases to be the place of drawers' bank.
"To address the difficulties faced by the payee or the lender of the money in filing the cases because of which, large number of cases were stuck, the jurisdiction for offence under Section 138 has been proposed to be clearly defined," it said.
The Negotiable Instruments (Amendment) Bill, 2015 was passed in the Lok Sabha last month but could not be taken up in the Rajya Sabha.
The release said that the objective of the ordinance is to ensure fair trial keeping in view interests of the complainant by clarifying the territorial jurisdiction for cases for dishonour of cheques.
Officials said the move will benefit 18 lakh people.