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Expediting Cheque-Bouncing Cases

Expediting Cheque-Bouncing Cases

Plight of the complainant deserves no little attention than the huge pendency of cheque bouncing cases and its reasons.

The erosion of faith in judicial system is certainly carcinogenic for any democratic setup where the basis of governance of state is rule of law and equity. The latest trends show that the largest contribution to the litigation is the cases filed under section 138 of the Negotiable Instruments Act, 1881 (the Act), which are called cheque bouncing cases. According to a recent survey, there are about 38 lakh cases of cheque-bouncing pending in various courts across the country.

The basic purpose of the Act is to expedite or aid the commercial proceedings wherein the transactions take place by negotiable instruments. Considering the usage and requirements of the present time, the Act was amended by the Parliament in 2002 to bring it at par with the present times.

Section 138 of the Act provides the procedure and punishment for dishonour of cheque and tries to ensure that the drawer does not casually get his cheque dishonoured. After the amendment to the Act in 2002, millions of cases of dishonour of cheque started piling up before courts. In majority of cases, the complainants were banks and financial institutions. In certain cases, the cheque amount is as petty as Rs. 500/- to Rs. 1000/-.

PROCEDURES FOR FILING COMPLAINTS UNDER SECTION 138 OF THE ACT

Initially, a complaint is filed along with the dishonoured cheque, return memo of the bank and the notice issued for recovery, along with the postal receipt before the First Class Judicial Magistrate or Metropolitan Magistrate, as the case may be. Thereafter, the complaint is marked to the magistrate in whose jurisdiction it falls. It is pertinent to note that an affidavit of pre-summoning evidence is also filed along with the complaint.

Thereafter, the Presiding Magistrate issues summons to the accused after satisfying himself as to the compliance or fulfilment of the ingredients of section 138 of the Act. The process of issuing summons and the proof of receipt of intimation of the case is very cumbersome, non-practical, and lead to massive delays. Any accused against whom a complaint is made, avoids the receipt of summons. This invariably causes the court to adjourn the matter for at least three or four dates after which, the court issues bailable warrants against the accused.

SUGGESTED SOLUTIONS

The solution to this problem lies within the system. Recently, the Reserve Bank of India (RBI) has directed all the banks to follow the ‘Know-Your-Customer’ norms. Under this, it has been made mandatory by the RBI that all banks having any customer account must have the photograph, latest address, PAN number, telephone number and other details so that the bank can easily contact its customer. Now, any person who issues a cheque immediately comes to know of the dishonour of his cheque since the drawer bank also puts a nominal penalty of Rs. 50/- to Rs. 100/- on the dishonour. Thus, if the trial court issues summons of the complaint to the drawer bank, a duty is cast upon the bank by the statute to inform their customer by post or telephone. Thus, the delay in serving the summons to the accused would be wiped off.

To reduce the period of litigation in cases under section 138 of the Act, verification of the case should be done on the very first date and summons be issued to the accused on the same date. There should be a dedicated infrastructure and support staff of the court for service of summons. Large scale disposal can be ensured by resorting to Lok Adalats and evening courts. The courts should impose stringent penalty and aim to dispose of the case in a time-bound manner. Also adjournments should be allowed only in extreme cases.

Deepak Sabharwal
Managing Partner, Deepak Sabharwal & Associates

Vinay Vaish Partner at Vaish Associates, Advocates

It has been observed that in more cases than one, the complainant becomes the accused himself due to the cumbersome procedural requirements of pursuing the complaint coupled with huge pendency in the courts and rampant corruption at all levels.

The court, after releasing the accused on bail, fixes the matter for hearing on a subsequent date which again due to the huge pendency is fixed most of the times beyond more than one year of when the accused was released on bail. Invariably the counsel for the accused, on the date of hearing on one pretext or the other, manages to seek adjournment in the matter. All through this process, the complainant, due to the criminal nature of the proceedings, is required to be present on each hearing in person whereas the accused, having been released on bail, is at liberty to be present through his counsel. The whole purpose of filing the complaint is lost due to the burdensome nature of pursuing such matters.

It is rather unfortunate that the complainant, far from being able to recover the money, is instead made to incur further expenses in the form of legal and other expenses to keep the said litigation going. All this while the real accused is, in fact, enjoying the funds that actually belong to the complainant and is also saved from the hassle of attending the hearing.

The irony of the situation is that the solution to the problem is available within the framework of the Act itself which provides that the trial of a matter has to be concluded within a period of six months from the date of filing of the complaint. This, however, does not take into account the time taken to get the summons served on the accused. Besides, summons through the mode of courier and speed post, e-mails should be considered as a valid mode of service. Another practical suggestion is that the designated court can appoint practicing counsels as local commissioners who may be entrusted with the responsibility of ensuring that the summons are served on the accused in a timely manner and the accused does not take advantage of the corruption prevailing in the system which aids the non-service of the summons, thus delaying the matters for years together.

Further, as majority of the persons use mobile phones, the banker can inform the accused by way of Short Message Service (SMS). Further, the concerned bank branch should display the court summons on the notice board. In the present time of advanced communication, the above amendments would certainly advance the cause of justice.

It is widely seen that the banks and financial institutions, instead of filing recovery suits, file complaints under section 138 of the Act. It is pertinent to note that for filing a recovery suit, a court fee of one to two per cent of the claimed amount is to be paid, however, in case of complaints under section 138 of the Act, only a nominal stamp of Rs. 2 is required to be affixed. Therefore, to avoid payment of a larger court fee under recovery suit, banks and financial institutions file cases under section 138 of the Act. Here also, the legislature should consider taxing the institutions or banks with additional court fees, which can in turn be used for strengthening the judicial infrastructure. Another grey area in these cases is the procedure conducting the trial, i.e. the mandate of the Code of Criminal Procedure, 1973.

Further, wherein any conviction is made, or compromise is reached between the parties, or the matter is compounded, it should be obligatory upon the accused or the complainant party to pay at least five to ten per cent of the cheque amount to the state exchequer.

The suggested amendments would certainly help in expediting the cheque-bouncing litigation directly and also discourage frivolous litigation.

About Author

Inderpreet Josh

Inder Preet Singh Josh is an LL.M and an advocate in the Supreme Court of India.