This article is written by Ms. Somya Jain, from the Vivekananda Institute of Professional Studies. The article has established the need for speedy trial for the complaints filed under Section 138 of the Negotiable Instruments Act and has attempted to contemplate the recent judgments and the recommendations made by the Supreme Court to provide for the same. 

Introduction 

One of the largest backlogs of cases that can be discovered in the Indian legal system is related to the dishonour of cheque under Section 138 of the Negotiable Instruments Act, 1881 (Negotiable Instruments Act, hereinafter). According to a recent report by Mr. Sidharth Luthra, who was appointed as an amicus curiae in a suo moto writ petition case, made a contention that the total number of criminal cases pending before the courts amounts to 2.31 crores. Out of these 35.16 lakhs pertains merely to cases filed under Section 138 of the Negotiable Instruments Act. 

While such a huge number of cases are pending for disposal before the judiciary, the question arises on the efficiency of the existing laws which are formulated for the perusal of cases under Section 138 of the Negotiable Instruments Act. The extensive amount of procedure required to be followed by the courts in such cases corresponds to unwarranted delay in disposing of the cases. The pendency of these cases adversely affects the other criminal cases as well. How far is it justified to continue with this tainted system while one can amend the same?

The article attempts to articulate the necessity for establishing additional courts for disposing of cases registered under Section 138 of the Negotiable Instruments Act. It further interprets the reasons for the accumulation of such cases with the corresponding provisions. 

An overview of Section 138 of the Negotiable Instruments Act

Section 138 of the Negotiable Instruments Act deals with cases about the dishonour of cheque. It establishes the circumstances under which a case for the dishonour of cheque is filed. The essential requisites for a case to fall under this category are:

1. A cheque should have been drawn by a person to another for payment of money in respect to some debt or liability
2. The cheque has to be presented within 3 months (as per RBI notification) or within the period of its validity whichever is earlier
3. The cheque is returned unpaid by the bank either due to insufficiency of funds or that the amount exceeds the arrangement made with the bank to pay from that particular account
4. The payee or the holder of the cheque will make the demand, through a notice in writing, for the payment of the amount to the drawer. It has to be done within 30 days of receipt of information by him regarding the return of the cheque unpaid.
5. Lastly, the drawer of the cheque has failed to make the payment of the drawn cheque to the payee or the holder of the cheque within 15 days of receipt of the notice. 

The purpose of Section 138 of the Negotiable Instruments Act was to enhance the efficacy of the banks with greater credibility through cheques. The Act aimed to prevent the unscrupulous drawing of cheques and protect honest drawers from unreasonable prosecution. 

Reasons behind overloading of cases based on this provision 

It is pertinent to note that with commercial globalisation in play, the usage of cheques has been increased. This further escalates the cases of dishonour of cheques. One of the main problems faced by the Indian judiciary in disposing of these cases expeditiously is that, with a steady increase of complaints every year, the rate of disposal does not match the rate of the institution of complaints. The delay in disposal results in incurable loss, injury and inconvenience to the payee and erodes the credibility of the issuance of the cheque. 

Many attempts have been made by the legal fraternity to combat the issue of the  accumulation of cases. The Law Commission of India, in its 213th report submitted in the year 2008, surveyed the statistical, infrastructural and legal dimensions of the docket explosion concerning Section 138 and gave detailed recommendations. The report studied the situation comprehensively and expressed the relevant changes in the functioning of the legal system which would ensure speedier disposal of cases. It also gave importance to the fundamental right to life and liberty guaranteed under Article 21 of the Constitution of India which can be infringed if there is any delay by the court in providing expeditious disposal of criminal proceedings. One of the major suggestions made by the Law Commission through its report was to set up fast-track courts. 

According to the report, the alarming situation of the courts calls for a speedier and fair trial. Which could be achieved through these special courts. Based on these recommendations, some states instituted special courts for this purpose, but according to the statistics collected by the Supreme Court, the policy failed miserably. It came across the court that the policy was haphazard and illogical which only resulted in further accumulation of cases. 

Some of the reasons behind the pendency of cases are listed below. They are:

Service of summons 

One of the major reasons for the delay in disposal of the cases registered under Section 138 of the Negotiable Instruments Act is the extensive procedure followed in issuing summons to the accused. Under Chapter 6 of the Code of Criminal Procedure, 1973, the process of summons has been incorporated. The magistrate after taking cognizance of the offence and establishing reasonable grounds in the complaint shall then issue summons to the accused. If the accused abstains from appearing before the court, a non-bailable warrant can be issued by the court. Even then if the accused fails to make his presence known, the court will issue a bailable warrant. The entire process of issuing summons to the accused clogs the expedited disposal of these cases. 

Conversion of summary trial to summon trial

As per Section 143, Sections 262 to 265 of the Code of Criminal Procedure (CrPC) empowers the court to try all the offences. The second proviso of the said Section enunciates that the magistrate has the power to convert the summary trial to a summons trial if according to him the sentence of imprisonment exceeds one year or if it is undesirable to try the case summarily. This Section has been widely used by the court and as a result, most of the cases are routinely converted from summary trial to summons trial. Further, it has been noted that magistrates have been indulging in converting these cases without recording the reasons for it. This leads to exorbitant delay in disposing of the cases of dishonour of cheque. The very purpose of Section 143, which deals with expedited disposal of cases under 138, has been greatly undermined by the practices of the court.

Inquiry under Section 202 of Code of Criminal Procedure 

According to Section 202 of the Code of Criminal Procedure, it is mandatory on part of the magistrate to conduct an inquiry if the accused resides outside the jurisdiction of the court. Many High Courts were of the view that it should not be mandatory for a magistrate to conduct an inquiry merely because the accused resides outside the jurisdiction of the court. This creates an additional burden on the existing judiciary and makes it even more difficult to dispose of the cases expeditiously. 

Section 202(2) stipulates that the magistrate will examine the witnesses and record evidence on oath, while Section 143 lays down that the evidence of the complainant will be recorded through affidavit. This creates a lacuna in the law and as per the general practice of the court, the magistrate undertakes the evidence of the witnesses under cases of Section 138 personally and not through the affidavit. Such acts of the courts are bound to increase the pendency and burden of cases on to the judiciary.

Multiplicity of proceedings 

According to Section 219 of the Code of Criminal Procedure, if a person is accused of having committed more than one offence of the same kind within the time frame of twelve months, then three of these offences can be tried jointly. This provision eliminates the opportunity to try the offences jointly if it exceeds the limitation of the three offences. The courts thereby witness multiple complaints for the same offence and against the same accused. Trying the offences separately results in a disproportionate accumulation of cases and undue delay in the disposal of cases.

Inherent Power of the Court

As per the general rule, Section 143 of the Negotiable Instruments Act is read with Section 251 and Section 258 of the Code of Criminal Procedure. Section 258 of CrPC enumerates that on a plea by the accused before the magistrate that no such process should have been instituted as there is no substance of the offence, the magistrate can drop the proceedings against him if no reasonable grounds can be established. This provision has overlooked the mechanism which has already been provided to safeguard the interest of the parties. It further creates unnecessary delays and unaccountability on part of the judiciary.  

The perusal of Section 138 of the Negotiable Instruments Act, cannot be properly undertaken without construing the relevant provisions dealing in this arena. While applying these provisions in ascertaining the cases under Section 138, certain lacunae are presented before the court which is to be interpreted by it. It has been observed that the court follows the general practice while dealing with these. Often, these practices are said to form a major part in delaying the proceedings. Thus, it is pertinent to interpret the provisions holistically and contemplate the underlying purpose of the Act. 

The recent judgment of the Supreme Court in the matter 

It cannot be denied that the judiciary is overloaded with pending cases that are dragged for years without any decision being appropriated. While a majority of the cases are related to the dishonour of cheque, the court decided to examine the delayed proceedings and to provide a solution for accelerating the same. The court has considered the importance of speedy disposal and how adversely the delay in proceedings is affecting the machinery of justice. With this thought in mind, recently, the Supreme Court has registered a suo motu writ petition captioned as “Expeditious trial of cases under Section 138 of Negotiable Instruments Act 1881” to entertain the suggestions for speedy disposal of cases reported under Section 138 of Negotiable Instruments Act.

Background of the writ petition

The said suo moto writ petition was observed in pursuance of a backlog of cases that rendered the delivery of justice inefficient. The Court directed the amici curiae, Mr. Sidharth Luthra and Mr. K Parameshwar, to provide suggestions to expedite the disposal of said cases. This was observed by the court in the case of Makwana Mangaldas Tulsidas v. The State of Gujarat & Anr. (2020).

This case was instituted through a special leave petition (criminal) no. 5464 of 2016 which was related to the dishonour of two cheques on 27.01.2005 for an amount of Rs.1,70,000/-. The dispute remained pending for over 16 years which should have been disposed of summarily by the trial court within 6 months of its institution. It took about 7 years for the trial court to dispose of this case. Further, the case remained pending for years at various levels of the court which hampered the system of justice.

The Supreme Court observed that the intention of the legislature behind the Negotiable Instruments Act was to ensure faith in the efficacy of banking operations and credibility in transacting business on cheques. The criminalisation of dishonour of cheque was rendered to curtail the increasing offences under Section 138. Despite various amendments and precedents given by various courts, the dispensation of justice has failed to meet the intent of the legislation. Trial Courts are burdened with numerous pending cases. 

The court opined that one of the most obvious reasons for the pendency of the cases is the non-appearance of the accused before the court. While suggesting measures for the same, the court laid that the service of the summons should be conducted in an expedited manner. The magistrate can render the services via speed post, e-mail or any other speedier method. The court further opined that the bank being the major stakeholder in the respective transactions, will play an important role in providing the requisite details of the transactions and the corresponding parties. 

The bench stressed the concept of pre-litigation mediation in the cases registered under this provision. The National Legal Services Authority, being the responsible authority in this regard, may establish a scheme of settlement of cheque bounce cases at the pre-litigation stage. The decision of pre-litigation Alternative Dispute Resolution (ADR) will be considered equivalent to a civil decree thereby contributing towards reducing the docket burden. 

While considering the magnitude of the pendency of cases, the Supreme Court suggested that the High Courts can set up exclusive courts to deal with matters relating to Section 138, especially where there is a huge backlog of cases. The High Court can further formulate guidelines in this regard giving additional weightage to disposal of cases within the time-frame as per legal requirement.

Due to the grave injustice caused to the society, the Supreme Court decided to examine the situation of pendency of cases through a suo moto writ petition inviting suggestions from various stakeholders in the matter.

Suggestions recommended by the Supreme Court 

In Re: Expeditious trial of cases under Section 138 of Negotiable Instruments Act, 1881,(2020), the court attempted to provide solutions for speedy disposal of cases. The preliminary report submitted by the amici curiae in the said case suggested various amendments which can be incorporated to expedite the disposal of the cases. While laying down the reasons for the unwarranted backlog of cases, the 5 judge bench comprising CJI S.A. Bobde, made some necessary suggestions for the redressal of the same. 

Some of the suggestions are:

1. To deal with the issue of service of summons, the court opined that the service should be conducted through SMS, Whatsapp, email and postal services. Further, The Union of India, the Reserve Bank of India and the Indian Banks Association ought to create a nodal service agency for effective service of summons through electronic processes.
2. The bank is one of the important stakeholders in the transaction can provide the details as to the whereabouts of the accused along with issuing the dishonour slip which would reveal the phone number, e-mail address and postal address of the drawer of the cheque.
3. The Supreme Court directed the Magistrate to record cogent and reasonable grounds before converting a summary trial to summon trial. The High Court can frame guidelines directing the trial court to record reasons for converting the trials.
4. It has been observed by the court that the magistrate should conduct the inquiry on receipt of complaints under Section 138 if the accused is not a resident of the jurisdiction of the court. It should be then decided by the courts based on reasonable grounds whether to proceed with the accused. 
5. According to the Court, Section 202(2) of the Code should be read in consonance with Section 143 of the Negotiable Instruments Act. The court directed that the witnesses along with the complainant be examined through deposition in the form of an affidavit and only in exceptional circumstances the magistrate can examine the witness personally. In suitable cases, the Magistrate can restrict the inquiry to the examination of documents without insisting on examining the witnesses. 
6. The bench recommended that notwithstanding the restriction mentioned in Section 219 of the code, the court can try multiple offences against the same person concerning cases of dishonour of cheque instead of merely consolidating three similar offences conducted within a twelve months time frame. 
7. The High Court has to issue directions to the Trial Court to treat the service of summons in one complaint as deemed service as part of all the complaints forming part of the same transaction filed before the same court. 
8. It is reiterated that the trial courts have no inherent powers to recall or review the issue of summons. But this does not curtail the right to the trial court to revisit the order of issue of summons if it is found that it lacks jurisdiction to try the complaint.
9. Section 258 of the code does not apply to the cases registered under Section 138 of the Negotiable Instruments Act as it was found that Section 258 does not deal with “complaints”, while dishonour of cheques amounts to the filing of complaints with the competent authority. 

The bench directed the incorporation of a committee headed by Hon’ble Mr. Justice R.C. Chavan, former Judge of the Bombay High Court to deliberate especially on the need to establish additional courts to try complaints under Section 138 of the Act. Further, the matters within the preliminary report that has not been dealt with, will 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.

Judgments referred by the Supreme Court 

The matter before the Court amounted to clarification in certain judicial pronouncements given by the courts. Amici Curiae referred to various precedents questioning the scope of the provisions while interpreting the reasons for delayed proceedings. 

The Court viewed the case of  K. M. Mathew v. State of Kerala & Anr, (1991), no specific provision of law is required for recalling an erroneous order of issue of process and believed that there is no need for the magistrate to drop the proceedings as the order issuing the process is a mere interim order and not a judgment. This was held contrary to the judgments of Adalat Prasad v. Rooplal Jindal and Others (2004), and Subramanium Sethuraman v. State of Maharashtra & Anr. (2004). It was observed in the order taking cognizance, the lower criminal courts have no inherent power as per the code. Thus, the law established under  K.M. Mathew’s case was not correct. 

The Court also referred to Meters and Instruments Private Limited and Another v. Kanchan Mehta (2017). It was held in this case that if adequate compensation has been given to the complainant then the magistrate can discharge the accused. This judgment approved the inherent power of the court under Section 143 of the Negotiable Instruments Act read with Section 258 of the code where the magistrate can stop the proceedings at any stage with reasons in writing. According to the present bench, the decision iterated in the above case was a bad law as Section 258 did not include the cases filed through complaints. The decision in the above case relied on the words “as far as possible” under Section 143 which is only meant for the summary procedure and cannot be interpreted in respect of Section 258. Thus, cases for the dishonour of cheque cannot be covered under Section 258 of the Code. 

The above judgment established some mandate as regards speedy trial. 

1. The trial of cases relating to Section 138 of the Act must be with the nature of Summary Trial unless reasons call for Summons Trial, which is always exceptional.
2. The evidence of the complainant must be conducted within three months of assigning the case.
3. Endeavour must be made to conclude the trial within six months from the date of filing of the complaint.
4. The Trial, as far as practicable, must be held on a day to day basis unless reasons exist to do otherwise.

Another case namely Vani Agro Enterprises v. State of Gujarat & Ors (2019), was presented before the court for clarification. In this case, the court dealt with the dishonour of four cheques and the subsequent four separate complaints. The issue was raised therein for the consolidation of all four cases. As per Section 219 of the code, only three cases can be combined which are similar in substance. The court in the above case ordered the cases to be tried jointly. The bench found the view appropriate and also mandated to amend the act for trying multiple cases of similar nature before the same court, jointly. 

The court placed reliance on the judgment in the case Balbir v. State of Haryana & Anr, (2000). It was observed that all the offences alleged to have been committed by the accused forming part of the same transaction, shall be tried together irrespective of Section 219 of the code. These offences can be tried by the same court, even if it forms a part of a larger conspiracy. 

Viewing Supreme Court’s decision as acceleration for the Indian legal system

The decision of the Supreme Court has attempted to unclog the court processes and would provide relief to the society at large by dispensing speedy justice. With the necessary amendments stipulated by the Supreme Court, the lacunae in the law have been curtailed taking a step forward to achieve expedited disposal of cases. 

The underlying provision of pre-litigation mediation has been greatly emphasised which would contribute to reducing the burden of the judiciary. This would also be cost-effective and time-bound and would give a fresh breath to the courts. Further, considering the prevalent situation of the COVID-19 pandemic, the court recommended online mediation be conducted rather than summoning the accused physically.

Apart from the suggestions provided by the court in consonance with the legislative intent, the court provided for establishing separate courts. Article 247 of the Indian Constitution empowers the central government to set up additional or special courts to render speedy disposal. The court observed that past experiences prove that setting up separate courts have led to speedy disposal of the cases. 

The judgment and the suggestions made by the court has given a new horizon to the Indian legal system. It has enhanced the reach of  society to get justice through a holistic approach. With the reduction in pendency of the cases, the Indian legal system would see an acceleration in imparting justice. 

The recommendations made by the court have expanded the scope of legislation by articulating amendments to the Act. But the main question arises about the implementation of the said changes. Setting up fast-track courts requires additional human and judicial resources and if they are not enumerated then it can further clog up the cases. The scheme may look profitable prima facie but the challenge lies deep within.

Conclusion 

The Indian judicial system has been facing new challenges now and again and has tackled them with utmost precision. Expanding the scope of the legislation to render speedy justice has been one such step that would inspire confidence and create respect for the rule of law among the society at large. The judiciary acting as the guardian of the fundamental rights of the society protects the right to free and speedy trial under the said judgment. It is rightly said that justice delayed is justice denied. Therefore, the judiciary has to balance the interest of the parties along with dispensing effective and speedy justice. 

References 

• 9631_2020_31_501_27616_Judgement_16-Apr-2021.pdf (sci.gov.in)
• Microsoft Word – Preliminary Report – 11102020 .docx (livelaw.in)
• 213Th Report On Fast Track Majisterial Courts For Dishonoured Cheque … (indiankanoon.org)
• Speedy Disposal of Cheque Bounce Cases: Supreme Court lays down Guidelines (taxscan.in)
• No more “mechanical” conversion of complaints under Section 138 Negotiable Instruments Act from summary to summons trial; Magistrates “must” record reasons: Supreme Court | SCC Blog (scconline.com)
• Section 138 Of Negotiable Instruments Act: Overview – Finance and Banking – India (mondaq.com)

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