The Code on Wages, 2019 - Know the Impact on your Salary Structure

More than 50 crore workers have been engaged in the organized and unorganized sectors of our nation and even after 74 years of Independence, 90% of workers working in the unorganized sectors are denied access to all the social securities. In what has been termed as a revolutionary step by the Central Government to disentangle the web of multiple labour legislations by the codification of 29 laws into 4 Codes, it remains to be seen as to how these reforms will actually ensure “Ease of Doing Business” in India. While commendable steps have been taken, this Article aims at exploring the soon to be implemented, Code on Wages, 2019 under the New Labour Codes (“NLC”) from a holistic point of view which directly or indirectly impacts at least 50 crores working population of the country.

Background

The Second National Commission on Labour (2002) (“NCL”) observed that the existing legislation was complex, contained archaic provisions and inconsistent definitions.[1] Labour is a subject of Concurrent List, therefore, the decisions with respect to the Labour Laws can be equally made by the Parliament and State legislatures. The NCL, with a view to enhancing ease of doing business in India, recommended consolidation of laws related to labour into the following groups:

1. Wages;
2.  Safety;
3.  Industrial Relations;
4.  Social Security; and
5. Welfare and working conditions

The Ministry of Labour and Employment, in 2019, introduced 4 labour codes on:

1.  Wages
2.  Social Security
3.  Industrial Relations
4.  Occupational Safety, Health and Working Conditions. 

The Code on Wages, 2019 (“Wage Code”)

The Ministry of Law and Justice, Government of India notified the Wage Code in August 2019. As per Clause 1 of the Wage Code, it shall come into force on such date as the Central Government may by notification in the official gazette deem fit. As of date, it is expected that the Wage Code may be implemented and notified with effect from 01 April 2022.

The Wage Code subsumes the provisions of the Payment of Wages Act, 1936; the Minimum Wages Act, 1948; the Payment of Bonus Act, 1965; and the Equal Remuneration Act, 1976.

The Wage Code extends to the whole of India and is applicable to all establishments, employees, and employers, unless exempted.

Section 2(w) of the Wage Code introduces a uniform definition of wages. The definition will be applicable to all the existing labour laws subsumed in the 4 Codes.

The definition of wages comprises of following 3 elements:

1. Meaning and inclusion part;
2. An exhaustive list of exclusions; and
3. Conditional inclusion.

The definition prescribes that if the sum total of the excluded components (except Gratuity and Retrenchment Compensation) exceeds 50% of the total remuneration payable to an employee, then that portion of the amount which exceeds 50% shall be added back to the definition of wages. This definition has a wide-reaching impact in the current scenario as the amount prescribed in the special allowance (which is generally included in the current salary structures) will be added back to the wages (if the payroll structures are left unchanged). Further, the conditional inclusion entails that in a case an employee is given remuneration in kind, the value of such remuneration can be up to 15% of the total wages payable to the employee. 

The definition has a wide-reaching impact on both, the employer as well as the employee. For employers, the definition induces an increase in the pay-outs in the form of provident funds, employee state insurance, gratuity and other retiral benefits. This is because in the extant provisions, the employers are fulfilling the statutory liabilities on basic wages which are around 30% to 35% of all remuneration. Additionally, although not notified, there is a high possibility that the wage ceiling limit might increase or cap at INR 21,000. In such a case, the coverage of employees may also increase, as the excluded employees may now come within the ambit of the laws. For employees, there are chances that their net take-home income may decrease on account of an increase in the mandatory employee contributions under schemes such as PF.  

While the attempt to universalize the definition is a laudable step towards India’s objective of ‘Ease of doing Business', the following are the few aspects that warrant clarification:

1. Whether performance bonus/ bonus forming part of employment contracts are wages?
2. What will be the treatment of variable components?
3. Definition of ‘remuneration in kind’?
4. Meaning and extent of ‘defraying special expenses’?

Following are some of the notable changes introduced in the Wage Code

1.  Separate definitions of ‘worker’ and ‘employee’. Definition of ‘worker’ includes working journalists and sales promotion employees while the definition of employee includes persons carrying out managerial and administrative work.

2.  The concept of Floor Wages is introduced in the Wage Code. Central Government has the authority to determine the floor wage by taking into account the minimum living standards of workers in a manner that may be prescribed in near future (may vary on the basis of geographical areas). The effect of such a floor wage would be that the appropriate government under no circumstances can fix the minimum wage rate lower than the fixed floor wage.  

3.     The Wage Code raises the responsibility of the Employer to ensure proper wage structuring and timely reimbursement of wages to all the employees. Earlier, the provisions were only applicable to employees drawing wages less than INR 24,000/- per month.

4.    Limitation period for filing claims by the employees is increased to three years (from the date when claims arose) as against the extant provisions which provide a time limit from six months to two years.

5.   The authority’s role has now been broadened as inspectors-cum-facilitators wherein they are also required to provide compliance advisory to employers and workers alongside conducting inspections.

It may be stated that Wage Code is the right step towards India’s aspiration of boosting employers’ confidence while balancing employees’ rights. However, it remains to be seen as to how the final rules and other three codes complement the Wage Code.

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[1] Government of India Ministry of Labour, Report of the National Commission on Labour, Volume II, 2002, New Delhi 

For any further queries, clarifications, and suggestions, please feel free to contact the undersigned author or write to us at protalkz03@gmail.com.

Everything you need to know about Retrenchment

 “If you’re on this call, you are part of the unlucky group that is being laid off,” said the CEO of Better.com (an Online mortgage lender Company) that recently fired over 900 of its employees over a Zoom call. 

The services of about 9% of the establishment’s workforce in the US and in India were terminated effective immediately over a zoom call. The affected employees in the US were paid severance pay of four weeks and a month’s full benefits. The video of the Zoom call received many reactions, with people slamming the employer for its actions.

“I’m curious whether you think a CEO can survive after a blunder like this? Is it fair, or not, to allow a second chance…?” tweeted Anand Mahindra, Chairman of Mahindra Group.

An employee commits to give his best performance to the establishment while an employer, in lieu, is the provider of the livelihood to the employee. This employer-employee relation is essential for an establishment to function as a going concern.

Retrenchment as defined in Section 2(oo) of the Industrial Disputes Act, 1947, means termination by the employer of the services of a workman for any reason whatsoever, otherwise than as a punishment inflicted by way of disciplinary action and does not include: -  

·        Voluntary retirement of the workman; or

·         Retirement of the workman on reaching the age of superannuation; or

·         Termination of the service of the workman on account of expiry of contract; or

·         Termination of the services on the ground of continued ill-health.

It may be noted that retrenchment can be for any reason whatsoever, and the things that may not be categorized as retrenchment are exhaustively listed. So, a company is well within its right to retrench its employees.        

 

Procedure of Retrenchment

 

The Industrial Disputes Act, 1947 which is the governing legislation of retrenchment in India does not apply to industrial establishments in which less than 50 workmen on an average per working day have been employed in the preceding calendar month. It provides a division of applicable laws on the following basis:

a)     Industrial establishments employing more than 50 workmen but less than 100 workmen on an average per working day in the preceding calendar month; and

b)      Industrial establishments employing more than 100 workmen on an average per working day in the preceding calendar month.

 

Establishments employing workmen between 50 to 100 workers

 

As per Section 25F of the Act, a workman continuously in service for at least a year shall be given:

 

1.   One month’s notice in writing indicating the reasons for retrenchment and the period of notice shall expire; or in lieu of such notice, wages for one month may be paid;

2.      Retrenchment compensation equivalent to 15 days of average pay for every completed year of service or any part thereof in excess of six months; and

3.      Notice in the prescribed manner shall be served on the appropriate government.

    

It is to be noted that all three conditions are a requirement under this categorization. 

 

Establishments employing more than 100 workmen

 

As per Section 25N of the Act, a workman continuously in service for at least a year shall be given:

 

1.   Three months’ notice in writing indicating the reason for retrenchment; or in lieu of such notice, wages for the period of the notice;

2.      Prior permission of the appropriate Government shall be obtained; and

3.      Where permission for retrenchment is granted, retrenchment compensation equivalent to 15 days of average pay for every completed year of service or any part thereof in excess of six months shall be paid.  

 

Following are further clarifications on the above conditions:

• Average pay is the average of three complete calendar months. For the purpose of calculation of retrenchment compensation, 15 days of the average of wages paid in the last three complete calendar months shall be computed for every year. Further, while calculating the service period for the purpose of retrenchment compensation, if the period of service includes a period in excess of six months then such period shall be deemed to be one complete year. Therefore, where a workman is retrenched after 8 years and 7 months of service then for the purpose of retrenchment compensation, his service period shall be deemed to be 9 years.

• 
  Notice of retrenchment shall be as per Form P prescribed in Rule 76 of the Industrial Disputes (Central) Rules, 1957

• Application for permission for retrenchment shall be made as per Form PA provided under Rule 76A of the Industrial Disputes (Central) Rules, 1957.

• An application for permission of retrenchment to the appropriate government (for establishments employing more than 100 workers) shall include the reasons for intended retrenchment and a copy of such application shall be served simultaneously on the concerned workmen.      

 

Therefore, assuming any such action as done by Better.com (on whom laws of US applies) is performed by an Indian entity, their action might not be legally incorrect if the workforce is less than 100 workmen (assuming such employees to be workmen), however, the manner in which the speech delivery was made could have been cautiously and strategically made on such a sensitive issue. 

For any further queries, clarifications, and suggestions, please feel free to contact the undersigned author or write to us at protalkz03@gmail.com.

Divorce Laws: Everything you need to know

A divorce is among the most traumatic occurrences for any couple. To add to this, it can also be a long-winded and costly affair in India if divorce is contested. Divorce is essentially the dissolution of marriage. It is a term used for the termination of the marriage. In India, just like marriage laws, divorce laws can be personal laws, depending upon the religion of the parties.

Divorce under Hindu law is classified into two types :

Mutual divorce: Under the Hindu Marriage Act, Mutual divorce is governed by Section 13-B. As the name suggests, in mutual divorce, both the parties i.e. husband and wife mutually agree and express their consent for peaceful separation. The husband and wife have to predetermine the issues relating to alimony and child custody if any. There are only two requirements for filing a mutual divorce, one is mutual consent and the other is that they have to live separately for at least one year. 

Contested Divorce: When divorce is initiated by either spouse it is termed as a Contested Divorce. Section 13 of the Hindu Marriage Act, 1955 provides the grounds for filing a contested divorce, some of which are, cruelty, conversion of religion, unsound mind, communicable disease or either spouse is unheard of more than seven-year.

Grounds of divorce

A divorce will be granted on the ground that the other party had the following action:

1. After the solemnization of the wedding, had voluntary sexual intercourse with any person other than his or her spouse
2. After the solemnization of the marriage, treated the petitioner with cruelty
3. Deserted the petitioner for a continuous period of not less than two years immediately preceding the presentation of the petition
4. Ceased to be a Hindu by conversion to another religion
5. Incurably of unsound mind, or suffering continuously or intermittently from mental disorder of such a kind and to such an extent that the petitioner cannot reasonably expect to live with the respondent
6. Suffering from leprosy or other such diseases, or disease in a communicable form
7. Suffering from venereal disease in a contagious way
8. Renounced the world by entering any religious order 
9. Not heard of being alive for seven years or more by those persons who would naturally have heard of it.

What is the procedure for mutual consent divorce in India?

Following is the procedure to file for mutual divorce in India:

STEP 1: Draft a petition stating the reason for seeking a divorce and both the parties have agreed on it.

STEP 2: File the petition jointly through respective lawyers before the family court.

STEP 3: The court after the examination of the petition along with the documents will pass on the order for the recording of the statement on oath.

STEP 4: After this, a cooling period of six months time is given to the parties in the hope of their reconciliation. In January 2020, the Supreme Court has waived off the statutory cooling period of 6 months, provisioned earlier in the Hindu Marriage Act of 1955, before granting a divorce.

STEP 5: Post 6 months, if there is no reconciliation, both the parties need to appear for the final hearing. (Parties have to appear for the second motion within 18 months from the date of filing the divorce petition.)

STEP 6: In the final hearing, the court passes the divorce decree dissolving the marriage

There are three aspects regarding which a husband and wife have to reach a consensus. One is alimony or maintenance issues. As per law, there is no minimum or maximum limit of support. It could be any figure or no figure. The second consideration is the custody of the child. This must necessarily be worked out between the parties, as it is inevitably what requires the greatest amount of time in divorce without mutual consent. Child custody in a mutual consent divorce can also be shared or joint or exclusive depending upon the understanding of the spouses. The third is the property. The husband and wife must decide who gets what part of the property. This includes both movable and immovable property.

As per the Hindu Marriage Act, the couple should be living separately for at least one year before divorce proceedings can begin. However, as per Section 10A of the Divorce Act, 1869, the couple is to be separated for at least two years. Do note that living separately does not necessarily mean living in different locations; the couple only needs to provide that they have not been living as husband and wife during this time period.

What is the procedure for a Contested Divorce in India?

The contested divorce is filed by either spouse based on the grounds mentioned above. The following are the steps to file for a Contested Divorce in India.

STEP 1: Draft a petition clearly stating the facts and grounds for seeking a divorce. This petition is filed before a family court having jurisdiction along with affidavits, vakalatnama, and documents relevant to the case.

STEP 2: If the court is satisfied after scrutinizing the petition and decides to move with the case, it sends a notice or summons the other party to appear on a decided date along with his/ her lawyer. 

STEP 3: At this stage, the court will suggest parties for mediation and if the mediation fails to resolve the issue, the court will continue with the divorce proceedings.

STEP 4: On a fixed date, both the parties will appear before the court, record their statements, submit evidence, get cross-examined, and will present their witnesses if any. Then the counsels from both sides will present their final arguments.

STEP 5: At last, the court on a fixed date will deliver the verdict and pass a divorce decree. The aggrieved party can appeal to the order passed within 3 months from the passing of such order.

Documents required 

1. Address proof of husband

2. Address proof of wife

3. Photographs of marriage between the husband and wife

4. Certificate of marriage

5. Evidence supporting the ground on which divorce is sought (cruelty, adultery, desertion, lunacy, leprosy, a presumption of death, conversion to another religion, etc.)

6. Professional and Financial proofs

Steps to begin with:

1. Legal Notice: Before anything, you should be aware to produce a divorce notice to your spouse. This is to clarify the emotions and a platform to initiate your thoughts on discontinuing the relationship. Legal notice for divorce will bring in clarity to the other spouse about the future relationship which you want to hold.
2. Alimony: When two people are married, they have an obligation to support each other. This does not necessarily end with divorce. Under the Code of Criminal Procedure, 1973, the right of maintenance extends to any person economically dependent on the marriage. This will include, therefore, either spouse, dependent children and even indigent parents.
3. Property matters: It seldom matters whether you or your spouse own the property. If you are married – irrespective of the fact that a divorce petition has been filed – you have the right to occupy the property.
4. Child custody: Many assume that the mother always gets custody of her children. This is not the case. While the courts usually agree to the decision of the parents in a mutual consent divorce, the courts will look into the best interest of the child.

How much does the whole process cost?

Cost is dependant on multiple factors like Court fees and expenses. Lawyers tend to charge fees towards the drafting of Notice, Petitions, and for Appearance. 

For any further queries, clarifications, and suggestions, please feel free to contact the undersigned author or write to us at protalkz03@gmail.com.

Top 10: Economic news and schemes

1. The Union Minister of Commerce & Industry “Ease of Logistic Portal”

• While launching the portal, the minister noted that the ‘Rules of Business’ have to be the same for all stakeholders.
• While addressing the event, the minister noted that the government would be providing everybody an equal opportunity to their businesses, irrespective of whether they are big or small business houses or where they are from, or another such differentiating factor.
• Ease of Logistics portal was launched to bring in transparency.

      2.  Review of the Intellectual Property Rights (IPRs) Regime in India

• Valuable Contribution of IPRs on Economy: A study indicates following is the impact:
• 1% increase in trademark protection increases Foreign Direct Investment (FDI) by 3.8%;
• 1% improvement in patent protection increases FDI by 2.8%; and
• 1% improvement in copyright protection increases FDI by 6.8%.

     3. Foreign Direct Investment  Inflows

• Foreign Direct Investment (FDI) inflows grew 62% during the first four months (April-July period) of current FY 2021-22 over the corresponding period last year (2020).
• Three Components:
• Equity capital: It is the foreign direct investor’s purchase of shares of an enterprise in a country other than its own.
• Reinvested earnings: It comprises the direct investors’ share of earnings not distributed as dividends by affiliates, or earnings not remitted to the direct investor. Such retained profits by affiliates are reinvested.
• Intra-company loans: These refer to short- or long-term borrowing and lending of funds between direct investors (or enterprises) and affiliate enterprises.

      4. China bans cryptocurrency

• China’s central bank, the People’s Bank of China, on September 24, 2021, announced that all transactions of crypto-currencies are illegal, effectively banning financial activities involving cryptocurrencies, such as trading crypto, selling tokens, transactions involving virtual currency derivatives.

      5. Government sets up India Debt Resolution Company Ltd (IDRCL)

• The government has set up an asset management company (AMC) named India Debt Resolution Company Ltd (IDRCL) with a paid-up capital of Rs. 80.5 lakh on an authorized capital of Rs 50 crore. IDRCL will work in tandem with the National Asset Reconstruction Company Ltd (NARCL) to clean up bad loans. 

      6. Single Window System for Investors

• The single-window portal is going to be a one-stop-shop for investors for approvals and clearances.
• Department for Promotion of Industry and Internal Trade (DPIIT) along with Invest India initiated the process of developing the portal as a National Single Window System (NSWS).
• DPIIT comes under the Ministry of Commerce and Industry.
• Invest India is the National Investment Promotion and Facilitation Agency of India and acts as the first point of reference for investors in India.

      7. Government launches e-SHRAM portal

• The government of India unveiled the e-SHRAM portal for better execution of various social security schemes for the unorganized sector workers.

  Key facts about e-SHRAM

  • The government will provide e-SHRAM cards to workers with the help of which they can register on the e-SHRAM portal.
  • All the e-SHRAM cards will have a unique Universal Account Number (UAN) and the workers can avail various benefits of the social security schemes via this card anytime, anywhere.
  • The 12-digit UAN number in the e-SHRAM card is valid throughout the country.         

Schemes 

        8.  PM Gati Shakti Master Plan

• On India’s 75th Independence Day, ‘PM Gati Shakti Master Plan’, was launched, with an Rs. 100 lakh-crore project for developing ‘holistic infrastructure’.

  What is the Gati Shakti Master Plan?

  • PM Gati Shakti Plan is a national infrastructure master plan.
  • Aim: To make a foundation for holistic infrastructure and give an integrated pathway to the economy.
  
  

        9.  Startup India Seed Fund Scheme (SISFS) 

• The Ministry of Food & Public Distribution launched the Startup India Seed Fund Scheme (SISFS).
• The Scheme aims to provide financial assistance to startups for proof of concept, prototype development, product trials, market-entry, and commercialization.
• SISFS will Secure seed funding, Inspire innovation, Support transformative ideas, Facilitate implementation, and Start a startup revolution.
• Online portal: Under the scheme, an online portal has also been opened up, which is created by DPIIT.
• It will allow incubators to apply for funds under this. 
• It can be accessed here

       10. Universal Basic Income (UBI)

• Sikkim will be the first state to roll out Universal Basic Income (UBI) and has started the process to introduce the unconditional direct cash transfer scheme.
• The central government too is exploring the possibility of providing direct benefit transfers to those Below the Poverty Line (BPL) through a UBI and for farmers through direct investment support.

 

 

Dishonour of Cheque for Insufficiency of Funds: Features, Defences and Current Scenario

Dishonour of Cheque for Insufficiency of Funds: Features, Defences and Current Scenario

Author: Nikhil Sukhija 

Introduction

The Bank of Hindustan, first joint stock bank established in 1770 introduced cheques in India. In 1881, the Negotiable Instruments Act (NIA) formalized the usage and characteristics of instruments like the cheque, the promissory note and the bill of exchange. With the advent of payment through cheques, the monetary transactions became much easier. In place of bundle of notes, a piece of cheque became more convenient and easy to use. It immensely helped in increasing the trade and commercial activities around the country. However, it also invited another set of new problems where people started issuing cheques without an intention of honouring them. The bouncing and dishonouring of cheques became a common phenomenon. For the purpose of ensuring credibility to the holders of the negotiable instruments, a criminal remedy in the form of penalty was introduced through Banking, Public Financial Institutes and Negotiable Instruments Laws (Amendment) Act, 1988 which was further modified by the Negotiable Instruments (Amendment) Act, 2002.[1] The penalty prescribed for the offence of cheque dishonour in Section 138 of the NIA is imprisonment for a term which may be extended to two years, or with fine which may extend to twice the amount of the cheque, or with both. Section 139 provides a presumption of liability of the drawer of the cheque unless contrary is proved. While Section 140 explicitly provides that “It shall not be a defence in a prosecution for an offence under Section 138 that the drawer had no reason to believe when he issued the cheque that the cheque may be dishonoured on presentment for the reasons stated in that section”. The Section 147 of the NIA provides that all the offences in this Act shall be compoundable. Therefore, the case of cheque dishonour is a compoundable offence.

A step-by-step guide for legal recourse

1.      A cheque has to be presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity.

2.      Upon such presentation of the cheque, if it gets dishonoured, the payee (person in whose favour cheque is drawn) have to send a Legal Notice within 30 days from the date of return of the cheque (through return memo).

3.      The payee through the Legal Notice asks the drawer of the cheque to pay the amount within 15 days from the receipt of the Notice.

4.      Upon the expiry of the aforesaid 15 days, the payee has to file a complaint case before the Court of Magistrate within 30 days of the said expiry.

5.      On filing of the complaint in the Court of Magistrate, court issues summons to the Accused.

Note: In case, the payee misses any of the stipulated timeline, he can present the cheque within its validity period, i.e. 3 months and upon each time of the dishonour, fresh cause of action arises. Nothing in the NIA precludes the payee from filing a separate civil suit for recovery of the amount due for which the limitation period is 3 years from the cause of action.

The Negotiable Instruments (Amendment) Act, 2018

The main aim of the amendment act is to reduce the undue delay in the cheque dishonour cases and incorporating a provision for making the payment of interim compensation to the complainants. The objective of the Act is to promote Ease of doing business in India.

Amendments

1.      Section 143A: It provides powers to the court to order the drawer of the cheque to pay interim compensation to the complainant when he pleads not guilty in a case of summary trial. The amount of compensation shall not exceed 20% of the amount of the cheque. On acquittal, the payee is bound to refund the amount along with RBI’s prevailing interest rate, to the drawer. The interim compensation shall be paid within 60 days from the date of the order of court.

2.      Section 148: it empowers the appellate court to order payment pending the appeal against conviction under Section 138 of the NIA. Minimum of 20% of the compensation awarded by the trial court may be ordered by the appellate court which shall be in addition to the amount already paid by the appellant under Section 143A.

Defences in the Case of Cheque Dishonour

One of the main ingredients in the case of cheque dishonour is that the payment must be made for the discharge of a legally enforceable debt and due to Section 139 (as explained above) the onus is on the accused to prove that there is no legally enforceable debt.

Cheque dishonoured was given as a Security

In the case of Joseph Vilangadan v. Phenomenal Health Care Services Ltd. & Anr., directors of the company had given certain cheques as refundable security deposits for ensuring due performance of their work. In the facts and circumstances of the case, there existed no debt or liability and the cheques were only given for the purpose of security. Therefore, no action under Section 138 of the NIA was maintainable.

Technical Defences

The technical defences include limitation period and defective notice.

Limitation

The limitation period prescribed in the chapter XVII of the Negotiable Instrument Act, 1881 is strictly to be adhered in the cases of cheque dishonour. After the receipt of cheque return memo of the dishonoured cheque by the payee, demand through the legal notice should be made within 30 days.

Through the legal notice, time period of 15 days is given to the other party following which complainant has 30 days to file complaint under Section 138. The timeline, if not strictly followed by the complainant may be as a defence at the disposal of drawer.

Defective Notice

If the mandatory legal notice is served in wrong person’s name, by quoting wrong figures or is delivered at wrong address. The same may provide leverage to the drawer as the mandatory requirement of Section 138 stood unfulfilled.

Vicarious Liability

Section 141 of the NIA, applies to the cases where offence is committed by a company and it provides for vicarious liability on every person, who at the time of the commission of the crime was in charge of and was responsible for the affairs of the company.

A three-Judge Bench of the Hon’ble Supreme Court in S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla & Anr.[2], referred to the Section 138 and 141 of the NIA and observed that a complaint must contain material to enable the Magistrate to make up his mind for issuing summons. It was held that Section 141 (2) of the Act envisages direct involvement of any director, manager, secretary or other officer of the Company in the commission of the offence. The reason for the same is that a person who is in charge of and responsible for the conduct of the business of the Company would naturally know why a cheque in question was issued and why it got dishonoured. Therefore, liability arises on account of conduct, act or omission on the part of the officer and not by virtue of his position in the company.

Thus, if a complainant is not able disclose the necessary facts when making complaint under Section 141 of the NIA, the same shall not be accepted by the court.

Current Scenario

Recently, the Supreme Court of India extended the period of limitation for cheque bouncing proceedings amid the COVID-19 pandemic and lockdown with effect from 15^th March. The Supreme Court invoking its plenary powers under Article 142 stated “In view of this court’s earlier order on March 23 and taking into consideration the effect of the COVID-19 and resultant difficulties being faced by the lawyers and litigants and with a view to obviate such difficulties and to ensure that lawyers/litigants do not have to come physically to file such proceedings in respective Courts/Tribunal across the country including this Court, it is hereby ordered that all periods of limitation prescribed under the Arbitration and Conciliation Act, 1996 and under Section 138 of the Negotiable Instruments Act 1881 shall be extended with effect from March 15 , 2020 till further orders,”.

Ease of doing business is the main objective behind the evolving nature of the treatment for the dishonour of cheques. In the time of COVID-19 induced lockdown where economic activities has taken a toll, the instances of cheque dishonour are expected to rise. In order to unclog the courts and enhance the ease of doing business in the country, the Department of Financial Services has sought public comments with respect to decriminalisation of some offences like bouncing of cheques. The move may be helpful in the short term but it also has the potential of getting misused.

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[1] Sant Lal Bhatia v. City Credit and Leasing Company III (2002) BC 210 (P&H)

[2] (2005) 8 SCC 89

For any further queries, clarifications, and suggestions, please feel free to contact the undersigned author or write to us at protalkz03@gmail.com.

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