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Dishonoured cheques

Dishonoured cheques? The question is whether the presence of these precedents conveys anything about the efficaciousness of the remedy under the Negotiable Instruments Act. One measure for this may be the level of convenience or inconvenience for the person who invokes the new remedy under section 138.

The Negotiable Instruments Act, 1881 was amended by the Banking, Public Financial Institutions and Negotiable Instruments Laws (Amendment) Act, 1988. Sections 138-142 in a new chapter (XVII) were added with effect from April 1, 1989, providing for penalties in cases of dishonour of cheques for insufficiency, etc, of funds in the relevant bank account of the drawer. These provisions were incorporated into the Negotiable Instruments Act specifically to enhance the acceptability of cheques in settlement of liabilities by making the drawer of the cheque liable for penalties, with adequate safeguards to prevent harassment of honest drawers.  The object was ``to enhance the acceptability of cheques in settlement of liabilities by making the drawer liable for penalties in case of bouncing of cheques due to insufficiency of funds in the accounts or for the reason that it exceeds the arrangements made by the drawer, with adequate safeguards to prevent harassment of honest drawers''.

In the last eleven years since the coming into effect of the new chapter on dishonour of cheques, considerable case law has built around the subject. The question is whether the presence of these precedents conveys anything about the efficaciousness of the remedy under the Negotiable Instruments Act. One measure for this may be the level of convenience or inconvenience for the person who invokes the new remedy under section 138.

Under section 142 of the Negotiable Instruments Act, 1881, the remedy can be invoked by filing a complaint before the concerned Magistrate etc. Since the Negotiable Instruments Act, 1881 does not itself provide the procedure for processing and prosecuting the complaint, the complainant has to follow the procedure under the general law i.e., the Code of Criminal Procedure, 1973 (Cr.P.C. for short). The procedure under the Cr.P.C entails examination on oath of the complainant and the witnesses – called the pre-summoning evidence. The crucial witnesses in the case of dishonour of the cheque are the bank officials from the drawer and drawee banks to prove the factums of insufficiency of funds and dishonour. For examining the said bank witnesses they have to be summoned with the record. Many times the said summoning itself consumes a lot of time. Then the bank officials, who are examined in the pre-summoning evidence, have to be summoned again for cross-examination after the accused joins the proceedings. On every date the complainant has to be present personally in the Court. On his absence the complaint is liable to be dismissed.

In these circumstances, it becomes quite difficult and inconvenient for the complainant to pursue the remedy under section 138. On each date of hearing the complainant has to wait for hours together in the Court. After getting the bank officials examined and accused summoned he has to again obtain the presence of the bank officials for cross-examination. This entire process may take more than three years in which case the complainant may even see his civil action for cheque amount becoming time barred. Normally under these circumstances the cautious complainant simultaneously files “summary suit” to avoid his suit becoming time barred due to the delay in the processing of his complaint. This entails more legal expense by way of court fee and lawyer’s fee.

The remedy would be more meaningful if the procedure provides - that the concerned magistrate, on being satisfied about the genuineness of the cheque and memo issued by the bank returning the cheque, should straightaway summon the accused. What is the necessity of examining the complainant or other witnesses in such a case when the bounced cheque and the memo of return are right before the Court? On the basis of these documents the Court can form a prima facie opinion enough to summon the accused. The advantage of this procedure would be that, on his appearance before the Court if the accused appreciates the gravity of charges and consequences, he might want to settle the matter by paying up the amount to the complainant. Of course necessary change in law for compounding of the offence under section 138 would also be required. Even without the provision for compounding the offence, every day complaints are being settled on payment of the amount due to the complainants by the concerned Judges. However, in cases where the accused insists upon a trial, the complainant will necessarily have to examine himself and other witnesses including the bank officials from the two banks. The proposed procedure just amounts to discarding the pre-summoning evidence, keeping in view those cases where the accused feels inclined to pay the cheque amount to avoid the penal consequences on his own assessment of criminal liability.  

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