Cheque dishonour proceedings require expeditious resolution

The large backlog and pending cases/disputes before various judicial venues, Courts, Tribunals, and other bodies have been regularly bemoaned by Indian courts. 'Justice delayed is justice denied,' is a well-known legal principle. "Though the swift trial is not specifically enumerated as a basic right, it is inherent in the broad breadth and meaning of Article 21," according to the Hon'ble Supreme Court. Article 21 states that no procedure can be considered "reasonable, fair, or just" if it does not ensure a reasonably rapid trial.

The Hon'ble Apex Court, further, in Shahid Balwa v. Union of India [Writ Petition No. 550, 551, 552 of 2012], while dealing with the issue of delay and pendency of cases, inter alia, observed, a large backlog of cases in the courts is often an incentive to the litigants to misuse the courts' system by indulging in unnecessary and fraudulent litigation, thereby delaying the entire trial process. Similarly, the Hon'ble High Court of Allahabad, in Siddhartha Kumar v. Upper Civil Judge, AIR 1998 All 265, recognised that the frightful problem of mounting arrears of cases in the subordinate courts is one of the greatest challenges which the Judiciary is facing today.

In reality, the Hon'ble Court was glad to propose specific proposals/recommendations to speed up the process of dispensing justice, acknowledging that the court system is under significant strain due to a large backlog of cases. Despite these frequent declarations, concerns, recommendations, and other actions by multiple Courts, the reality on the ground is rather grim. Unfortunately, due to procedural difficulties, insufficient courts and judges, numerous adjournments, and other factors, the problem of case pendency persists and has grown exponentially.

The provisions of Section 138 of the Negotiable Instruments Act, 1881 ("NI Act") were enacted to create "a particular provision by integrating a strict responsibility so far as the cheque, a negotiable instrument," according to the statute. Significantly, rules relating to cheque bouncing were included in a new Chapter XVII of the NI Act as a result of a change, to encourage the usage of cheques and strengthen their legitimacy. After noticing that the then prevailing Sections 138 to 142 of the NI Act were unable to fully achieve the desired outcomes, the legislature chose to include provisions from Sections 143 to 147 of the same Act with the "avowed object of quick disposal of matters connected to cheque dishonour." Significantly, these provisions attempted to simplify the procedure for trial of offences under the NI Act, including providing for a summary trial procedure for the charge under Section 138 NI Act and declaring the offence to be compoundable, as per Sections 143 and 147, respectively. However, despite the introduction of the said provisions, the desired result of expeditious disposal/ adjudication of such proceedings has remained an elusive dream.

The Law Commission of India in its 213th Report, inter alia, outrightly noted that despite being prescribed as an offence, "we hardly see any people being punished for bouncing of cheques….This all because courts in India are overburdened with dishonoured cheque cases.” It was, at the same time, noted that even now, around thirty-eight lakhs of cheque bouncing cases were pending adjudication before various courts across the country, which were, "not merely criminal trials but they involve the interests of commercial circles/economy of the globe." 

Accordingly, the Commission, while opening, "backlog of cheque bouncing cases need to be speedily disposed of.., lest litigants may lose faith in the judicial system", recommended, for the creation of Fast Track Courts of Magistrates to dispose of the cases under section 138 of the NI Act. 

At the same time, as per the Law Commission, "Central Government and State Governments must provide necessary funds to meet the expenditure involved in the creation of Fast Track Courts, supporting staff and other infrastructure.”

"Significantly, even the Hon'ble Apex Court, quite recently, while taking suo moto cognizance of great delays' occurring in the disposal of cases under the NI Act, resulting in creating a logjam in courts at all levels, professed for the establishment of additional courts in terms of Article 247 of the Constitution of India. Pertinently, before the said decision, the Hon'ble Supreme Court in Makwana Mangaldas Tulsidas v. the State of Gujarat [Special Leave Petition No. 5464 of 2016], recommended the High Courts to "consider setting up of exclusive courts to deal with matters relating to Section 138 ….Special norms for assessment of the work of exclusive courts may also be formulated giving additional weightage to disposal of a case within the time-frame as per legal requirement." Regrettably, the said recommendations are yet to fructify into ground realities.

Significantly, the problem of pending cheque-dishonour cases is not just being addressed by advocating for the creation of new courts and judges. In reality, the Courts have been proactively prescribing norms to accelerate adjudication in such situations from time to time.

The Hon'ble Supreme Court in Meters and Instruments (P) Ltd. v. Kanchan Mehta, REED 2017 SC 10002, while terming the offence under Section 138 of the NI Act as primarily a civil wrong/ in nature, observed that the object of the said provision is, "primarily compensatory, the punitive element being mainly with the object of enforcing the compensatory element, compounding at the initial stage has to be encouraged." Accordingly, to afford an accused an option to compound the said offence, the Hon'ble Court, inter alia, discoursed, "in every complaint under Section 138 of the Act, it may be desirable that the complainant gives his bank account number and if possible, e-mail ID of the accused. If an e-mail ID is available with the bank where the accused has an account, such bank, on being required, should furnish such e-mail ID to the payee of the cheque. In every summons issued to the accused, it may be indicated that if the accused deposits the specified amount, which should be assessed by the court having regard to the cheque amount and interest/cost, by a specified date, the accused need not appear unless required and proceedings may be closed subject to any valid objection of the complainant. If the accused complies with such summons and informs the court and the complainant by e-mail, the court can ascertain the objection, if any, of the complainant and close the proceedings unless it becomes necessary to proceed with the case.” However, it is important to note that, while the Hon'ble Apex Court has favoured the development of a scheme/mechanism for resolving disputes relating to cheque bounce at the pre-litigation stage, that is, before the filing of a private complaint, it has expressed reservations about requiring mandatory pre-litigation mediation in such cases.

In a recent order dated 16.04.2021, in Re: Expeditious Trial of Cases under Section 138 of the NI Act, the Hon'ble Supreme Court thoroughly analysed the reasons for the delay in adjudication of cheque dishonour cases from several perspectives. Notably, while remarking that the "gargantuan pendency of complaints filed under Section 138 of the Act has had an adverse effect in the disposal of other criminal cases", the Hon'ble Court, requested High Courts to issue practice directions to Magistrates, "to record reasons before converting trial of complaints under Section 138 of the Act from summary trial to summons trial" and "to treat service of summons in one complaint under Section 138 forming part of a transaction, as deemed service in respect of all the complaints filed before the same court relating to dishonour of cheques issued as part of the said transaction." At the same time, a recommendation was made by the Hon'ble Court for an amendment to the provisions of NI Act, providing for one trial proceeding against a person, accused of multiple offences under Section 138 of the said Act, committed within 12 months, notwithstanding the restriction in Section 219 of the Code of Criminal Procedure, 1973. It was further directed, "conduct of inquiry under Section 202 of the Code, evidence of witnesses on behalf of the complainant shall be permitted to be taken on affidavit. In suitable cases, the Magistrate can restrict the inquiry to the examination of documents without insisting for examination of witnesses." 

Further, in the given case the court, deprecated the practise of trial courts recalling/ reviewing their orders of summons, inter alia, inter alia, by discontinuing the said proceedings against accused(s), as against the provisions of CrPC. Nevertheless, the Hon'ble Court while clarifying that, though, the provisions under, "Section 258 of the Code do not apply to complaints under Section 138 of the Act", however, directed the Committee to consider the feasibility of, "amendment to the Act empowering the Trial Courts to reconsider/recall summons in respect of complaints under Section 138.”

In Alka Khandu Avhad v. Amar Syamprasad Mishra & Another, REED 2021 SC 03002, the Hon'ble Supreme Court, while acting to expedite the process of adjudication of cheque bouncing cases by throwing out frivolous litigations, held that even in case of joint liability, in case of individual persons, a person other than a person who has drawn the cheque on an account maintained by him, cannot be prosecuted for the offence under Section 138 of the NI Act. A person might have been jointly liable to pay the debt, but if such a person who might have been liable to pay the debt jointly, cannot be prosecuted unless the bank account is jointly maintained and that he was a signatory to the cheque.

Further while dealing with the habitual frivolous defences raised by the accused regarding the non-service of summons, the Hon'ble High Court of Karnataka in M. Nagappa v. Mohamad Aslam Savanur, REED 2021 Kant 03022, resolutely affirmed, "When a sender has dispatched the notice through registered post with correct address written on it, Section 27 of General Clauses Act could be profitably imported and in such a situation service of notice deemed to have been effected on the sender unless he proves that it was not served and he was not responsible for such non-service.”

Furthermore, the repeated declarations of Courts that the accused's defence in a proceeding under Section 138 NI Act does not fall within the purview or grounds of quashing proceedings under Section 482 CrPC is another instance geared at expeditious adjudication in such cases.

To summarise, the law in the area of cheque dishonour cases is replete with precedents that favour a quick resolution of such issues. Furthermore, the law in this area is constantly changing to decrease the load on the courts and meet the goal of Section 138 of the NI Act. Despite these changes and pronouncements, the goal of a quick conclusion of cheque dishonour procedures remains a distant dream. Without a question, the importance of a quick conclusion of a lawsuit cannot be overstated. The stakes are much higher when the situation has the potential to harm not just the country's productivity and economy, but also the peace and tranquillity of litigants and courts/judges. As the Hon'ble Apex Court, once stated in R.L. Gupta v. Union of India, (1988) 2 SCC 250, "Peace and tranquillity that will result from quick disposal of cases is much more valuable than the economic goods produced by factories. Delay in the disposal of cases affects the gross national product adversely…..Quick disposal of cases will also save millions of man-hours which are now being wasted near the courts in India." Therefore, seen in this perspective, though, the evolution of jurisprudence in cheque bouncing cases has brought us a step closer to achieving its objective; however, there is a long journey ahead to reach the ultimate goal.