All pending cases to be transferred to jurisdictional court where the cheque is presented
Defaulting borrowers have been truly put on notice as the recent cheque bounce ordinance will have retrospective application.
The ordinance issued on June 15 made it clear that all pending cheque-bounce cases should be transferred to the jurisdictional court where the cheque is presented. The move 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 Linehere.
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 an asset to turn non-performing and then take 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 will not only clear the confusion created by the Supreme Court order but also enable banks and NBFCs to use Section 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 modern day cheque truncation system, where the cheque does not travel to the drawee bank branch.
Recently, the Government had taken the ordinance route to fast track resolution of cheque-bounce cases.
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