DNA Legal Tips: Ironing the road blocks under the Negotiable Instruments Act 1881

Imagine you are given a cheque by someone in your name for money they owed you or for services rendered by you for them. You go to the bank, deposit the cheque and anticipate a lavish weekend when suddenly you get a notification from your bank that the cheque you deposited was not cleared, i.e.,was “dishonoured”. Your rightful money did not reach your account and your plans for the weekend go out the window. What do you do?

In India, these kinds of situations are legally covered under the Negotiable Instruments Act, 1881. The individual responsible for your empty bank account, the “defaulter”, can be held for their default in a criminal complaint filed by you under Section 138 of the Act. To summarise it, you first send them a legal notice demanding your money and if they fail to comply then you can file a criminal complaint. But even during the pendency of complaint, the law permits peaceful settlement upon payment by the defaulter.

Yet, as easy as it may sound, the Hon’ble Supreme Court of India found that the assured relief was not being received on account of planned delays by the defaulter or even due to technical and procedural delays. So, the Supreme Court with a view to do complete justice decided to take matters into its own hands and a bench of 5 Judges headed by Hon’ble Chief Justice Shri S.A. Bobde comprising Hon’ble Justice Shri L. Nageshwar Rao, Hon’ble Justice Shri B.R. Gavai, Hon’ble Justice Shri A.S. Bopanna and Hon’ble Justice Shri S. Ravindra Bhat in In Re Expeditious Trial of Cases under Section 138 of N.I. Act 1881 passed guidelines that though might not solve our problems fully tomorrow itself but in the long run just might help in shortening the road and the toil to the final outcome.

In consultation with appointed Amicus Curiae, various suggestions were put to the opinion of High Courts, Reserve Bank of India and the Director Generals of Police of the States. Upon receiving their responses, the Supreme Court passed the following guidelines in their attempt to smoothen the process of getting your money back:

a) Firstly, as the law makers had always intended that your money reaches you as quickly as possible, they made the procedure for trial of cheque bounce a “summary trial” which entails a swifter outcome when compared to the more common “summons trial”. The Supreme Court saw that most of the cheque bounce cases were getting converted into a detailed “summons trial” contrary to the mandate of the law makers. To check this practice, the Supreme Court required recording of reasoning whenever a Magistrate intended to convert a trial from summary to summons. When this is implemented, the routine conversion will reduce and cases can be summarily wrapped up at a faster pace.

b) Secondly, suppose you are the defaulter and a case has been filed against you in a different city. The Supreme Court has directed that before a notice is sent to you, the Court must see whether at first glance a case is even made out against you, i.e., a prima facie case. So, tomorrow if someone files a false case against you in a different city, the Court can first check the authenticity of the case prior to taking cognizance or dismissing it. Thus, even before asking you to appear or compelling you to look for a lawyer in a new city the Court can save you from any inconvenience if there is no merit in the case

c) Thirdly, as the law stands, a witness in your case would have to be present in Court to tell the story and support your cause. It is a fact that despite the common Indian claim of “I will see you in court!” people don’t like going to the courts. This would often lead to witnesses remaining absent and proceedings getting delayed. The Hon’ble Bench sought fit that if you as a Complainant can give your evidence in writing, the same privilege should be extended to the witnesses. This would mean that witnesses can depose in your favour while sitting in the comfort of their home and delays can be avoided.

d) Fourthly, suppose you had 4 cheques of the same transaction that got dishonoured. As per the present procedure you would have to file two complaints, Complaint A – containing 3 cheques and Complaint B – containing 1 cheque. This not only increased the delay but also increased the pendency of cases before the Court. What could be and should be done in one was effectively being done in two. The Supreme Court recognised this problem and suggested that if the cheques form a part of the same transaction and are within a period of 12 months, they should be tried together. Thus, meaning if you had 12 cheques and they all got dishonoured, the proceedings for all the 12 can be done together saving your time and money.

e) Fifthly, following the previous point, suppose Complaint A’s notice got served to the defaulter, but due to some technical issue, Complaint B’s notice did not get served to the same defaulter. This would lead to months and months of delay and frustration. The Supreme Court attempted to remedy this by stating that if Complaint A’s notice is served but Complaint B’s is not, since they are from the same transaction and ideally from the same defaulter, even notice in B would be considered served. They termed it as “deemed service”. Now you wouldn’t have to keep asking your lawyer why for the same defaulter one notice is served and the other is not.

f) Finally, the bench headed by the then Hon’ble Chief Justice S.A. Bobde clarified that a Magistrate’s order of taking cognizance of a case can only be challenged before the High Court under Section 482 of the CrPC. However, a power to reconsider their order may be given to the Trial Court itself was also suggested by the bench. This will prevent delay and you won’t have to worry about going to the High Court and waiting even longer for your money. Save on your time, save on your expenses and expect faster proceedings!

As of now these suggestions are pending consideration before the Committee headed by Hon’ble Justice R.C. Chavan, former Judge of Bombay High Court, but these guidelines are substantial and positive attempts to address serious issues plaguing the Negotiable Instruments Act, 1881 and in effect affecting the common man often caught in the clutches of bouncing of cheques. Hopefully, the recommendations are quickly implemented in the same spirit as envisioned by the bench headed by the then Hon’ble Chief Justice S.A. Bobde.

The author is an Advocate in Supreme Court

(Disclaimer: The views expressed above are the author's own and do not reflect those of DNA.)