How effective are the Cheque bouncing provisions under negotiable instruments act, 1881?

Introduction:

• Cheque must have been drawn  by a person(the drawer) in favor of a payee on his bank account for making payment
• Such  payment must be either in  whole or partial discharge of a legally enforceable debt
• Cheque must have been  returned by the Banker to the payee or holder in due course due to insufficient balance  in the account of the drawer or it exceeds the arrangement  he  had with the bank

• Cheque must be presented within a period of 6 months from the date of cheque or its validity period which ever is earlier. (Cheque validity period is now reduced to 3 months)
• The payee or holder in due course must demand payment of the  cheque amount by written notice within 15 days of receipt of notice
• Such notice must be issued within 30 days from  the date of receipt of  intimation of dishonor from bank and
• The drawer of cheque fails to pay demanded sum within 15 days from the date of receipt of the notice

• Time limit for issuance of notice: It increased the time limit for issuance of notice for demanding payment of dishonored cheque amount from 15 days to 30 days from the date of receipt of banker’s Memo of dishonor.(Section 138}
• Punishment term: Imprisonment term has been extended up to 2 years in place of one year. similarly fine can be levied up to twice the amount of the cheque dishonored {Section 138}
• Mode of service of summons: Approved serving of summons by post/courier approved by session’s court for speedy trial/ prosecution. In case of refusal to receive summon, it shall be deemed to have been duly served on certification by the authorized person of postal dept or courier for this purpose{Section 144}
• Evidence on affidavit: Evidence of complainant may be given by him by way of an affidavit and such an evidence can be a basis for issuance of summons. A discretion has been given to court to accept affidavit on evidence and only on request of the accused summon. {Section 145}
• Bankers Memo as evidence: Allowed acceptance of Bankers memo of dishonour as prima facie evidence {Section 146}
• Compounding of offence: Another notable feature is that Section 147 provides for compounding of the offence which means an escape route is provided for avoiding imprisonment even during the trial.

1. Recently it is reported in a news paper that about  30% of  pending in the country  are relatable to NI act cases and violations under  MV act  which is a cause for huge concern. This is an indicator of the state of affairs. One of the reasons is less number of judicial magistrates in comparison to the increasing number of 138 cases.
2.  Banks have been offering loans more liberally and collect post dated cheques in advance and in many of the cases the judgment of the financial capacity is wrong or in their endeavor is to reach targets for loans disbursal
3. In many of the courts, Magistrates are caught in dilemma about as to whether CRPC is to be followed or special provisions of NI act to are to be followed. A discretion has been given to the courts and every magistrate has to exercise such power judiciously.
4. It is noticed that some of the courts still follow the archaic system of for serving of summons which takes at least 6 months while the upper time limit of 6 months is specified  for disposal. E-mails /Fax/fast courier are not used for serving of summons and In many cases, the accused manages with the post department dak server and returns the summon resulting in serving of summons second time.
5. Adjournments are granted liberally and no efforts are made to complete evidence and cross examination on the same day. This is the usual practice adopted by the advocate of the accused for mutual benefit.

• There should be fast track courts to deal exclusively 138 cases.
• Number of unfilled vacancies of posts of Magistrates must be kept to the minimum.
• The Courts have to be strict in not allowing adjournments to the accused and endeavor should be made  to dispose off cases within 6 months from the date of complaint or a maximum period of one year.
• Appeals should not be allowed unless the accused gives valid reasons or brings out deficiencies in judgment of lower court.
• Frivolous appeals should be dismissed as sufficient safeguards exist to take care of interests of accused. Once fine levied or imprisonment should not be reduced in appeals so that the punishment acts as deterrent.
• Amendments should be made to empower  Courts to direct accused for  deposit of full amount of the cheque before the trial starts as it will compel accused to settle for compounding at the earliest.
• Courts must adopt suitable and effective procedure to achieve the objective of the Act. Even the Supreme court in its recent  judgments interpreted the provisions and reversed its  earlier judgments  to strengthen the faith  in the NI act and it remarked that any narrow interpretation  will  benefit offenders and not the payee.