Pending Cheque Dishonour Cases – The Way Forward

While cheques are preferred for their versatility of use, they often lead to defaults in payment or dishonour of cheques. The dishonour of cheques due to insufficiency of funds is dealt with under Section 138 of the Negotiable Instruments Act, 1881 (hereinafter referred to as “the Act”) which was introduced through the Banking, Public Financial Institutions and Negotiable Instruments Laws (Amendment) Act, 1988.

Introduction

Over the last few years, a notable rise in the number of financial transactions can be observed. This has certainly increased the occurrence of defaults in payments and given way to disputes. Though cash is still the preferred mode of payment in the country, there has been an upsurge in the use of digital payments in the last few years[1].  Traditionally, cheques have been used as an alternative to cash and have been a favoured mode of payment for people wanting to make cashless payments. According to a report published by the RBI in the year 2013, cheque-based payments constitute as high as half the total non-cash payments turnover[2]

Issue of Pending Cheque Dishonour Cases and Judiciary’s Response

Section 138 of the Act penalizes the drawer of the cheque when the same is dishonoured due to insufficient funds or if the amount exceeds the amount arranged (with the bank) to be paid from that account. Though the Act specifically provides for the summary trial of cheque dishonour cases, the process followed by the Magistrates has proven to be lengthy and tedious. As per a report filed by the amici curiae, Adv. Sidharth Luthra and Adv. K Parameshwar before the Hon’ble Supreme Court, cheque dishonour cases account for more than 8% of the total pending criminal cases with a total of 35.16 lakh pending cheque dishonour cases. The high number of pending cases can be attributed to the conversion of summary trials to summons trials by Magistrates in the exercise of discretionary power conferred under the Act[3]. This has not only frustrated the object of the Act but has also resulted in high expenditures.

The Metropolitan Courts and Judicial Magistrates have been burdened with cases under Section 138. In this regard, the Hon’ble Supreme Court has laid down certain guidelines in Indian Banks Association v. Union of India[4]. According to these guidelines, the Magistrates were required to scrutinize the complaint, affidavit and other documents on the day of the presentation of the complaint for cognizance of the complaint. For the purpose of examination-in-chief, the Magistrates were directed to complete them within 3 months. To do so, the Court was given the discretion to conduct an examination through affidavit.

In the case of Damodar S. Prabhu v. Sayed Babalal H[5], the Hon’ble Supreme Court laid down guidelines regarding the compounding of the offence under Section 138 of the Negotiable Instruments Act, 1881. For instance, it was decided that the Hon’ble Court may allow compounding of the offence of the Accused without imposing any costs if the application for compounding of the offence was made at the first or second hearing by the accused.

In the case of Meters and Instruments Private Limited v. Kanchan Mehta[6], the Hon’ble Supreme Court held that the Magistrate can at any stage stop the proceedings against the accused if the accused has adequately compensated the complainant and on this ground, the accused should be discharged as well.

Even though numerous directions have been given by the Hon’ble Courts to tackle the high volume of cheque dishonour cases, the issue was not altogether resolved, and it became a cause for urgent attention when a cheque dishonour case amounting to ₹1,70,000/- was found to have been pending for more than 16 years. Hence, the Hon’ble Supreme Court was propelled to take suo moto cognizance of the matter in the case of In Re: Expeditious Trial of Cases under Section 138 OF N.I. ACT 1881[7]. In this case, certain guidelines were laid down to ensure a speedy trial of cheque dishonour cases. After these guidelines were set down, the Hon’ble High Court for the State of Telangana came up with its own guidelines, some of which are listed below: –

  • All the Courts are required to follow the guidelines set forth by the Hon’ble Apex Court in the case of Indian Banks Association v. UOI[8]. Further, every case under Section 138 of the Act has to be registered as a summary trial case [Summary Trial Cases – Negotiable Instruments (STC – NI)]. The personal presence of the complainant need not be insisted on for registration; the same can be done through a power of attorney unless the attorney does not have personal knowledge of the transaction.
  • Assistance of police to be taken for the purpose of serving summons and warrants to the accused.
  • The capacity of the accused to engage a counsel to represent him in the Court proceedings has to be ascertained. If the accused is not in a position to afford legal representation, the Court has to appoint a legal aid counsel to represent the accused.
  • If the Court is satisfied that there is a scope for settlement, it may direct the parties to mediation or Lok Adalat. If a settlement is arrived at, then an execution application has to be filed. However, if the case is not settled, then the matter needs to be posted for framing charges or examination under Section 251 of CrPC.
  • Till the stage of filing of the defence statement, the Court has to treat it as a summary trial and the scope of converting it to a regular summons case can be considered only after examining all aspects of the case as prescribed in the guidelines.
  • Every cheque dishonour case has to be concluded within a period of 6 months and a judgment should be pronounced within 3 days from the day of the conclusion of final arguments.

Impact and Analysis

The guidelines issued by the Hon’ble Courts have proven to be effective in filling up the lacunae in the existing procedural law, accelerating the justice delivery process, and tackling the rising cheque dishonour cases. It was noticed that in the exercise of their discretionary powers, Magistrates proceeded with the conversion of cases under Section 138 of the Act to regular summons cases without even recording reasons for the same. By mandating that the case has to be treated as a summary trial in the initial stages, the guidelines ensure that the process involves fewer expenses and is time-saving and streamlined.

The said guidelines also provide for means of settlement, which encourage the use of Alternative Dispute Resolution (ADR) mechanisms. The compounding of offence in the trial’s initial stages has been incentivized as charges are imposed if the application for compounding is filed at later stages of the trial. In instances, where the accused lives outside the Court’s territorial jurisdiction, an inquiry needs to be held after which the Magistrate would decide whether to proceed with the case or not which saves the Court’s time to a considerable extent.

Coming to the concerns not addressed yet, the guidelines issued by the Hon’ble Apex Court specify that summons are to be sent through email and other electronic means and the same can be monitored through a Nodal Agency. However, there is ambiguity regarding the agency’s creation, functions, powers and regulation. Also, the guidelines laid down by the Hon’ble High Court for the State of Telangana do not make a reference to such an agency. The Courts also have not contemplated the technicalities involved such as the time that would be spent on inquiry, the possibility of a case not getting resolved through ADR mechanisms, etc.

Conclusion

Time and again, the Hon’ble Courts have taken up the initiative and issued guidelines to deal with the pending cheque dishonour cases and to ensure a speedy trial of such cases. However, it cannot be denied that the judiciary is overburdened with cases and there is a need to establish additional Courts and improve the already established infrastructure to deal with matters under the Negotiable Instruments Act, particularly pertaining to the dishonour of cheques. It is rightly said that “justice delayed is justice denied” and an overburdened Court will not be able to serve justice within a reasonable time. Such delays inevitably lead to the public losing trust in the justice mechanism and the judiciary. Therefore, setting up a sufficient number of Courts with well-trained judicial officers and staff is the need of the hour for the timely disposal of such cases.

References:

[1] Reserve Bank of India, Concept Note on Central Bank Digital Currency (Oct. 07, 2022) https://www.rbi.org.in/Scripts/PublicationReportDetails.aspx?UrlPage=&ID=1218

[2] Reserve Bank of India, Discussion Paper on Disincentivizing Issuance and Usage of Cheque (Jan. 31, 2013) https://www.rbi.org.in/scripts/PublicationReportDetails.aspx?UrlPage=&ID=698

[3] In Re: Expeditious Trial of Cases under Section 138 OF N.I. ACT, 1881

[4] (2014) 5 SCC 590

[5] (2010) 5 SCC 663

[6] AIR 2017 SC 4594

[7] SUO MOTU WRIT PETITION (CRL.) NO.2 OF 2020

[8] Supra 4

Image Credits:

Photo by cottonbro studio: https://www.pexels.com/photo/a-person-s-hand-holding-a-cheque-6862457/

Time and again, the Hon’ble Courts have taken up the initiative and issued guidelines to deal with the pending cheque dishonour cases and to ensure a speedy trial of such cases. However, it cannot be denied that the judiciary is overburdened with cases and there is a need to establish additional Courts and improve the already established infrastructure to deal with matters under the Negotiable Instruments Act, particularly pertaining to the dishonour of cheques. It is rightly said that “justice delayed is justice denied” and an overburdened Court will not be able to serve justice within a reasonable time. Such delays inevitably lead to the public losing trust in the justice mechanism and the judiciary. Therefore, setting up a sufficient number of Courts with well-trained judicial officers and staff is the need of the hour for the timely disposal of such cases.

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Transcribing Court Proceedings with AI Technology: An Analysis

The Supreme Court of India has recently come up with the decision to make use of AI-powered natural language processing technologies in transcribing court proceedings. The idea is to capture what people inside the court were speaking and convert it from speech to text.

This intelligent automation will speed up the process of creating transcripts that are later made available to various stakeholders such as lawyers, parties involved in the concerned case, etc. Quicker access to transcripts will benefit lawyers, especially during multi-day hearings. This AI solution, named – Technology Enabled Resolution (“TERES”), developed by Bangalore-based Nomology Technology Private Limited, was already being used for transcribing arbitration matters and has proved its value because specialist transcribers often had to be hired from abroad, adding significantly to the overall cost borne by the parties.

With AI already permeating much of human society, it was only a matter of time before the judiciary also adopted it in the sphere of litigation. Nonetheless, the decision to move ahead with the experiment is laudable and especially so in light of the apex court’s recent decision allowing live-streaming of certain hearings (i.e., of only those hearings that relate to the interpretation of our constitution and where the bench comprises five or more judges).

These two steps will force all stakeholders in our legal ecosystem to change their mindsets, ways of working, and in-court behaviour. Over time, one hopes that such changes will collectively yield various benefits some of which are listed below:

  • Improved justice delivery system (based on better arguments and more efficient access to and assessment of evidence).
  • Reduced pendency of cases (based on faster disposal of matters as well as a decline in the tendency to approach courts for frivolous matters).
  • Easier and cost-effective access to legal recourse for larger sections of our society.
  • Minimised use of time-wasting tactics (e.g., needless adjournments).
  • Higher standards of courtcraft and a better understanding of the context in which certain comments are made by the bench or the bar.
  • Better recordkeeping.
  • More accountability.
  • Enhance learning for newer generations of lawyers.

For years, the government has sought to make India a preferred centre for international arbitration and mediation. Progress on the ground has however been slow. The wider use of modern technologies may prove to be a catalyst in this regard. This can also be a boost to improve the ease of doing business in India, especially at a time when, for various geopolitical and economic reasons, foreign direct investment is on the rise. At the same time, the burgeoning start-up scenario in India is attracting significant private equity and venture capital. A lot of intellectual property is being created in India and needs to be suitably protected. Especially because much of it has to do with emerging areas that are critical to the future of our country and indeed, the world.

To be sure, there will still be various practical challenges that need to be ironed out. As pointed out by the Hon’ble Chief Justice of India, Dhananjaya Y Chandrachud, multiple voices at the same time may well confuse the AI tool and hinder accurate transcription. Different accents and loudness of voices may also potentially complicate matters. Also, unless the entire judiciary (across all courts) adopts such technologies, the benefits will be limited. Such widespread adoption may still be derailed by objections from various quarters.

Therefore, it is too early to conclude with any level of certainty that the above-mentioned benefits (and possibly, others) will indeed be realized, and if yes, how long it will take. However, the Supreme Court’s decision to use technologies to usher in greater levels of efficiency and transparency is a clear signal of intent. As the old saying so presciently reminds us, even a journey of a thousand miles begins with the first step. That step has been taken.

Image Credits:

Photo by Tara Winstead: https://www.pexels.com/photo/clear-mannequin-on-dark-blue-background-8386365/

For years, the government has sought to make India a preferred centre for international arbitration and mediation. Progress on the ground has however been slow. The wider use of modern technologies may prove to be a catalyst in this regard. This can also be a boost to improve the ease of doing business in India, especially at a time when, for various geopolitical and economic reasons, foreign direct investment is on the rise. At the same time, the burgeoning start-up scenario in India is attracting significant private equity and venture capital. A lot of intellectual property is being created in India and needs to be suitably protected. Especially because much of it has to do with emerging areas that are critical to the future of our country and indeed, the world.

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Turning a Corner With Live Streaming of Constitutional Matters

On September 27, 2022, India’s Supreme Court began to live-stream hearings of all matters taken up by its constitutional benches, making them fully accessible to the public in real-time. This follows a decision that was first taken in September 2018. Although the pandemic caused a delay in the implementation of this decision, it is noteworthy that this decision reportedly had the support of all judges (including CJIs). This speaks to the judiciary’s willingness to adapt to change and play its role in strengthening India’s democratic traditions and enhancing the efficiency of its justice delivery system, which bears a disproportionately huge burden given India’s demography.

By and large, courtroom proceedings around the world are not permitted to be legally recorded, let alone broadcast. This decision by India’s highest court of law makes us one of the few countries (if not the only one) where certain types of hearings are now open to audiences worldwide. I believe this is a good move that has a number of benefits, although given the increasingly digital world we live in, there are also some downside risks.

Benefits

A key malaise that has long beset India’s justice delivery system is the tendency of lawyers of one or both parties to seek frequent adjournments as a matter of routine strategy. While this may be legitimate in some cases (e.g., awaiting evidence, unavailability of witnesses, etc.), it is also blatantly used as a tactic to cover for lack of preparation, to buy time, or simply delay justice delivery. Not for nothing has the Indian judiciary been accused of abetting “taareekh pe taareekh” (moving from one date of hearing to another with no substantive progress towards a verdict).

Allowing the public to view proceedings will help ordinary citizens understand the process better, and thus build more confidence in the judiciary. With the performance and reputations of at least some advocates under public glare, we can expect that they will be better prepared to argue matters. Advocates on Record (AOR) will expect to be fully briefed in time, forcing lawyers advising the parties to do their homework thoroughly. All this will hopefully contribute to reducing the pendency of cases because neither party (or their lawyers) will want to be seen as the ones responsible for delaying justice delivery.

The decision to live-stream matters being heard by constitutional benches will have other benefits as well. Many clients who are part of multi-party matters, class action suits or public interest litigations don’t always get updated with accurate information about what transpired. Livestreaming provides access to clients who are not in a position to physically attend the hearing; they can issue new instructions to their lawyers if necessary. This is important because matters that are typically heard by constitutional benches are those that have far-reaching implications for Indian society and the country.

Law students and young professionals at the start of their careers can learn courtcraft by watching experienced advocates/senior advocates and judges in action (how they question advocates to identify irrelevant arguments, time-wasting tactics, etc.). This will be of particular advantage to aspiring lawyers from outside the National Capital Region, for whom traveling to Delhi or interning with Supreme Court advocates is not affordable or otherwise possible.

The Down-sides

However, in the increasingly digital world we live in, such live-streaming also has some potential risks. Social media can be misused to post partial or incorrect information, and this can trigger law and order risks. Social media may be used by vested interests to malign advocates or members of the judiciary, which can vitiate not just the proceedings, but also public perception. There is also the risk of hackers, who can disrupt the streaming in various ways.

Open dialogue, transparency and fairness are basic tenets of a healthy democracy. This major step taken by India’s Supreme Court has the potential to improve India by enhancing the citizenry’s understanding of and appreciation for the rule of law. It can also raise the standards of the next generation of lawyers. Constitutional benches take up weighty matters of national importance, so I hope this step toward ushering in greater transparency will help fill the dangerous cracks that have emerged in our pluralistic country’s social fabric over the last 75 years.

By and large, courtroom proceedings around the world are not permitted to be legally recorded, let alone broadcast. This decision by India’s highest court of law makes us one of the few countries (if not the only one) where certain types of hearings are now open to audiences worldwide.

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