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.