Facts and background:
The Supreme Court was hearing a petition relating to dishonour of two cheques in 2005, for a total amount of ₹1,70,000/-, tried and contested over a period of 15 years up till the top court. The Supreme Court noted that a matter which is supposed to be disposed of summarily by the trial court in 6 months, it took 7 years for this case to be disposed of at the trial court level. A dispute of such nature has remained pending for 15 years in various courts, taking judicial time and space up till this Court.
The Dishonour of cheque, which originally gave cause of action to file a civil suit, was criminalised in the year 1988, with the insertion of Chapter XVII in the Negotiable Instrument Act, 1881. Cheque dishonour, followed by default in payment after a demand notice, became punishable under Section 138 with imprisonment or fine which may extend to twice the amount of the cheque or both.
Supreme Court’s observations:
The Supreme Court stated that the legislative intent behind the above-mentioned amendment was to ensure faith in the efficacy of banking operations and credibility in transacting business on cheques. It was to provide a strong criminal remedy in order to deter the high incidence of dishonour of cheques and ensure compensation to the complainant. Subsequent amendments in the Act and the pronouncements of this Court reflect that it was always perceived that these cases would be disposed off speedily so as to preserve the object of criminalisation of the act.
Despite many changes brought through legislative amendments and various decisions of this court mandating speedy trial and disposal of these cases, the Trial Courts are filled with large number of pendency of these cases. A recent study of the pending cases, reflects pendency of more than 35 lakh, which constitutes more than 15% of the total criminal cases pending in the District Courts. Further, there is a steady increase in the docket burden.
The Supreme Court observed that plain reading of its previous judgements in the cases of Indian Bank Association & others v. Union of India and Ors., and Meters and Instruments Private Limited and Anr. v. Kanchan Mehta (2017 Latest Caselaw 725 SC), would show the following mandates with regard to the expeditious trial of cases of this nature:
- The trial of cases relating to Section 138 of the Act must be with nature of Summary Trial unless reasons call for Summons Trial, which is always exceptional.
- The evidence of the complainant must be conducted within three months of assigning the case.
- Endeavour must be made to conclude the trial within six months from the date of filing of the complaint.
- The Trial, as far as practicable, must be held on a day to day basis unless reasons exist to do otherwise.
The bench further stated that, “though, these mandates exist, they cannot operate in vacuum without addressing the factors attributable to the long delay of disposal of cases, urging holistic consideration. One of the major factors, for high pendency is delay in ensuring the presence of the accused before the Court for trial. As per recent study, more than half of the pending cases, i.e. more than 18 lakh cases, are pending due to absence of accused.”
The top court suggested a solution to the above stated issue saying that, “Taking effect from Section 144 of the Act, Section 62, Section 66 and Section 67 of Cr.P.C. and directions of this Court, the Magistrate may opt for one or many of the methods of service of summons, including service through speed post or the courier services, Police Officer or any other person, e-mail or through a Court having territorial jurisdiction.”
The Apex Court pointed out another issue stating that “Many a time, police as serving agency, does not give heed to the process issued in private complaints. Courts also remain ambivalent of this fact, requiring the complainant to pay unjustified process fee, repeatedly and avoid to take action against negligent police officers,” and urged taking of coercive methods to secure the presence of accused viz. attachment indicated in Section 82 and Section 83 Cr.P.C. (which allows attachment of property, including movable property), are seldom resorted.
The Court raised the need to evolve a system of service/execution of process issued by the court and ensuring the presence of the accused, with the concerted efforts of all the stakeholders like Complainant, Police and Banks.
The bench further said that banks, being the important stakeholders in cases of this nature, it is their responsibility to provide requisite details and facilitate an expeditious trial mandated by law. An information sharing mechanism may be developed where the banks share all the requisite details available of the accused, who is the account holder, with the complainant and the police for the purpose of execution of process.
The bench suggested that “the Reserve Bank of India, being the regulatory body may also evolve guidelines for banks to facilitate requisite information for the trial of these cases and such other matters as may be required. A separate software-based mechanism may be developed to track and ensure the service of process on the accused in cases relating to an offence under Section 138 of N.I. Act.”
Considering ever growing institution of N.I. cases, another important suggestion made by the bench was developing a mechanism for pre-litigation settlement in these cases. The Legal Services Authorities Act, 1987 provides for a statutory mechanism for disposal of case by Lok Adalat at pre-litigation stage under Sections 19 and 20 of the Act. An Award passed at the pre-litigation stage or pre-cognizance stage shall have an effect of a civil decree.
The National Legal Services Authority, being the responsible Authority in this regard, may evolve a scheme for settlement of dispute relating to cheque bounce at pre-litigation i.e. before filing of the private complaint. This measure of pre-litigation ADR process can go a long way in settling the cases before they come to Court, thereby reducing docket burden.
In addition to the above, the Supreme Court called upon the High Court to consider setting up of exclusive courts to deal with matters relating to Section 138, especially in establishments where the pendency is above a standard figure.
The Supreme Court also observed that, “the nature of offence under Section 138 primarily relates to a civil wrong. While criminalising of dishonour of cheques took place in the year 1988 taking into account the magnitude of economic transactions today, decriminalisation of dishonours of cheque of a small amount may also be considered, leaving it to be dealt with under civil jurisdiction.”
Directions:
The Court directed that the matter to be registered separately as Suo Moto Writ Petition (Criminal) with the caption ‘Expeditious trial of cases under Section 138 of N.I. Act, 1881’ and requested Sidharth Luthra, Senior Advocate, former ASG, to assist the Court as Amicus Curiae.
Ordered issuance of notice to the Union of India through Law Secretary, Registrar General of all the High Courts, the Director General of Police of all the States and Union Territories, Member Secretary of the National Legal Services Authority, Reserve Bank of India and Indian Bank Association, Mumbai as the representatives of Banking institutions.
Bench: Chief Justice S.A. Bobde, Justice L. Nageswara Rao
Case Title: Makwana Mangaldas Tulsidas v. The State of Gujarat
Case Details: Special Leave Petition (Criminal) No. 5464 of 2016
Read the Order:
