SECTION 138 OF NI ACT: ITS GARGANTUAN PENDENCY AND EFFECTS.
Society has evolved from a barter system to the creation of Currency to create a common medium of exchange during a trade. however, a cheque provides more benefit than cash like evidence of payment, hence more convenient is a Negotiable Instrument that serves as a secure option for a transaction without the fear of loss or theft of cash.
The negotiable instruments act, 1881 act has criminalized the dishonour of cheque as a criminal offence to prevent its misuse and promote the practice of cheque. However, the criminalizing of dishonouring of cheque u/s 138 of NI Act has resulted in compiling of around 40 lakhs cases in various courts.
What is a Cheque and its essential Parties?
Section 6 of N.I Act, 1881 defines a cheque as
“A cheque is a bill of exchange drawn on a specific banker and not to be payable otherwise than on demand and its include the electronic image of the cheque”
It is clear from the definition that a cheque is a bill of exchange drawn on by a specific banker and is payable only on demand.
The necessary parties to the cheque are drawer, drawee and payee.
Drawer is the person or the entity from whom the amount of cheque is drawn. i.e Signatory of the cheque.
Payee is the person who is receiving the amount.
Drawee is usually the bank where the cheque has been presented by the payee.
Dishonour of cheque: An offence
A great hardship is caused to a person if a cheque issued in his favour is dishonoured due to insufficiency of funds in the account of the drawer of the cheque. To discourage, such dishonour, dishonour of cheque is made punishable under Negotiable Instruments Act, 1881.
The object of Chapter XVII which is entitled “OF PENALTIES IN CASE OF DISHONOUR OF CHEQUE FOR INSUFFICIENCY OF FUNDS IN THE ACCOUNTS” is to ensure the credibility in the transacting business through cheques is maintained.
The conditions shall be fulfilled to ensure the liability under Section 138 is created upon dishonour of cheque the dishonoured cheque must be given for payment of any amount of money for the discharge, in whole or in part of any debt or liability.
Therefore, cheque drawn as a gift, donation or security or in the discharge of moral obligation would not be considered under this section.
Presumption: when the cheque is dishonoured it shall be presumed that the holder has received the cheque in discharge of a debt or liability. Thus, to prove contrary the drawer of a cheque must rebut the presumption by proving the reason for the cheque was not in discharge of debt. The effect of section 138 & 139 is to place an evident burden on the accused proving that the cheque is not to discharge the liability.
The delay in Disposal in Complaints under Section 138 of N.I Act.
There is a various reason for the huge pendency of cheque bounce cases even after enhancing the punishment under this act from one year to two years in section 147 of N.I Act. However Hon’ble court identified 7 major issues from the responses of the state government in a Suo Moto Cognizance by the court.
Service of Summons: Producing summons are said to be the main reason for causing a delay in the disposal of the complaints. To understand what is summon after the magistrate takes cognizance of the complaint under section 138 of NI act. The accused is summoned to appear before the court and on refuse to comply the same a bailable warrant and later a non-bailable warrant is issued against accused.
However, to reduce delay the court has suggested that the dishonour slip by the bank under section 146 of the act shall include the current mobile number, email address and postal address of the drawer of a cheque for enabling quick summons to the accused.
2. Conversion of Summary Trial to Summons Trial: Th second provision empowers the magistrate to convert the trial to summary trial if he believes that the sentence of more than one year is to be passed.
However, the court observed that summary trial is routinely converted into summons trial, hence the High court is directed to issue guidelines for the trial court to record sufficient reason for converting such trial into summons trial and has to be accepted by High Court.
3. Inquiry by the magistrate: The magistrate powers are wide and one such power of summoning before the court is provided by this Act, but the question arises for the accused residing beyond territorial jurisdiction.
However, the court reexamined the powers and held that inquiry shall be conducted on receipt of the complaints under section 138 of N to arrive at sufficient ground when such accused is beyond the territorial jurisdiction of the court.
4. One accused one trial: the court took note of the point that there are multiple cases under 138 NI Act of one person caused unnecessary delay.
Thus amendments for the one trial against a person for multiple offences under section 138 committed within 12 months shall be implemented.
The gigantic pendency of complaints filed U/s 138 has an adverse effect on the disposal of other criminal cases. The supreme court has taken Suo Moto of the matter to reduce the burden of the trial courts. Such amendments in the process of complaints of dishonour of the cheque are need of the hour, as the section once made to uphold the credibility of the cheque now is been immensely misused by a large section. The Apex court, therefore, upheld that reasons of converting trials shall be recorded, beyond territorial jurisdiction inquiry shall be made, one trial for multi offences under the act was implemented for smooth function of the process under the act.
1. Negotiable Instruments Banking and Insaurance- Dr.Ashok Jain
2. Crminal Manual- Justice M.R Mallick
3. Suo Motu Writ Petition (CRL.) NO.2 OF 2020