Supreme Court issues directions for speedy trial of offences for dishonour of cheques u/s 138 of Negotiable Instrument Act 1881

Supreme Court issues directions for speedy trial of offences for dishonour of cheques u/s 138 of Negotiable Instrument Act 1881

ABCAUS Case Law Citation
ABCAUS 3486 (2021) (04) SC

Important case law relied referred:
Vijay Dhanuka & Ors. v. Najima Mamtaj & Ors
Meters and Instruments Private Limited and Another v. Kanchan Mehta  
Subramanium Sethuraman v. State of Maharashtra & Anr
Balbir v. State of Haryana & Anr
Vani Agro Enterprises v. State of Gujarat & Ors
K. M. Mathew v. State of Kerala & Anr.
Madhukar Nimbalkar and Anr
Birla Corporation Limited v. Adventz Investments and Holdings Limited & Ors
K. S. Joseph v. Philips Carbon Black Ltd & Anr
Adalat Prasad v. Rooplal Jindal and Others

Supreme Court issues directions for speedy trial of offences for dishonour of cheques 

Under of the Negotiable Instruments Act, 1881 (‘the Act’), dishonour of cheques for insufficiency of funds is punishable with imprisonment for a term of one year or with fine which may extend to twice the amount of the cheque as per Section 138. Section 139 deals with the presumption in favour of the holder that the cheque received was for the discharge, in whole or in part, of any debt or other liability.

In large number of cases filed under Section 138 of the Act pending at various levels, a Division Bench of the Hon’ble Supreme Court had suo moto decided to examine the reasons for the delay in disposal of cases and the Registry was directed to register a case.

The issue was later referred to a larger Bench.

The Negotiable Instruments (Amendment and Miscellaneous Provisions) Act, 2002 inserted Sections 143 to 147 in the Act w.e.f. 06.02.2003. Section 143 empowers the court to try complaints filed under Section 138 of the Act summarily, notwithstanding anything contained in the Code of   Criminal Procedure, 1973 (the Code). The section also stipulates that an endeavour be made to conclude the trial within six months from the date of filing of the complaint. Also, the punishment was enhanced from one year to two years.

Based on responses received from the State Governments and Union Territories, Amici Curiae identified seven major issues as under:

(a) Service of summons on the accused

(b) Statutory amendment required to Section 219 of the Code to avoid multiplicity of proceedings where cheques have been issued for one purpose

(c) Summary trials routinely converted to summons trials in a mechanical manner.

(d) Attachment of bank accounts

(e) Applicability of Section 202 of the Code related to conduct of inquiry for the purpose of deciding whether sufficient grounds justifying the issue of process are made out.

(f) Mediation – cases pending at the appellate stage before High Courts / Supreme Court can be settled through mediation.

(g) Inherent jurisdiction of the Magistrate to revisit the order of issue of process if he has no jurisdiction to try the case.

The Hon’ble Supreme Court issued the following directions in this regard:

(1) The High Courts are requested to issue practice directions to the Magistrates to record reasons before converting trial of complaints under Section 138 of the Act from summary trial to summons trial.

(2) Inquiry shall be conducted on receipt of complaints under Section 138 of the Act to arrive at sufficient grounds to proceed against the accused, when such accused resides beyond the territorial jurisdiction of the court.

(3) For the 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 examination of   documents without insisting for examination of witnesses.

(4) We recommend that suitable amendments be made to the Act for provision of one trial against a person for multiple   offences under Section 138 of the Act committed within a   period of 12 months, notwithstanding the restriction in Section 219 of the Code.

(5) The High Courts are requested to issue practice directions   to the Trial Courts 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.

(6) Judgments of this Court in Adalat Prasad and Subramanium Sethuraman have interpreted the law correctly and we reiterate that there is no inherent power of Trial Courts to review or recall the issue of summons. This does not affect the power of the Trial Court under Section 322 of the Code to revisit the order of issue of process in case it is brought to the court’s notice that it lacks jurisdiction to try   the complaint.

(7) Section 258 of the Code is not applicable to complaints under Section 138 of the Act and findings to the contrary in Meters and Instruments (supra) do not lay down correct law.   To conclusively deal with this aspect, amendment to the Act empowering the Trial Courts to reconsider/recall summons in   respect of complaints under Section 138 shall be considered by the Committee constituted by an order of this Court dated 10.03.2021. 

(8) All other points raised by the Amici Curiae  in their preliminary report and written submissions and not considered herein, shall be the subject matter of deliberation by the aforementioned Committee. Any other issue relating to expeditious disposal of complaints under Section 138 of the Act shall also be considered by the Committee.

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