DECRIMINALIZING SECTION 138 OF NI ACT: AN ACT OF INTELLIGENCE OR AMBIGUITY

We all are living in a completely unprecedented time phase which has never been experienced by any other individual elder or wiser in the history. The spread of Pandemic Covid-19 across the globe has brought almost every single industry, government and individual dreams to a still and has force to rethink the strategies for execution of our future even and course.

In light of the same, the government has been regularly updating and setting up provisions in order to ease the process of daily work and to make sure every single industry jumps back to its original phase as soon as possible. With the same view, the Ministry of Finance issued a notification, requesting views and suggestions about the idea of the Government to decriminalize offences pertaining under the Negotiable Instruments Act, 1881.

The N.I.Act contains around 39 sections which have been criminalized with minor offence under 19 different Acts. The sole motive of the Ministry of Finance to pass the notification was to ease the process of doing business in the country and invite further entities to join the Indian market. It also aims to reduce court proceedings in case of issues with respect to business transaction and unlock the mode of effortless business transaction in the country.

The major impact in case of decriminalizing of the offence under the Act would be seen under Section 138 of the Negotiable Instruments Act, 1881, as being the most important of the all which has the biggest outreach with the general public. The Section 138 and Section 142 was inserted by Banking, Public Financial Institutions and Negotiable Instruments Law (Amendment) Act, 1988. It clearly punishes the person in case of dishonouring of cheque for any prescribed reason, with imprisonment for a term which may extend to two years, or with fine which may extend to twice the amount of cheque or with both.

In India, majority of the business entities use the mode of cheque for payment and rotation of cycle, which directly affect the big business houses. It clearly shows the importance of the legal binding nature of the Act which controls the process of dishonoring. It was mentioned in the 213th Report of Law Commission of India that there were around 38 Lakh criminal cheque bounce cases pending before different courts. This clearly impacts the trading sector of our economy as these pending cases result in creating bigger problems for the trade and commerce along with the judicial system of our country.

The most important aspect which needs to be considered is that the courts are being overburdened with the criminal cases and are not able to take up the important matters within the time frame provided. Even though the act of dishonouring of cheque is considered as an offence under Section 420 of the Indian Penal Code, 1860 (Cheating), the courts are necessarily trying the cheque bounce cases under Section 138 of the NI Act because of its nature. Even for the part of settlement, Section 147 of the Negotiable Instruments Act, 1881 has diluted the affect and importance of Section 138 of the Act, as it has made the offence under Section 138 of the Act compoundable, enabling the parties to settle the dispute and dropping the charges.

The diminishing value of Section 138 of the Act clearly craves a path of civil remedy too which is available to the parties because of its nature alongside the criminal remedy already existing. The confusing state of offences indeed puts the judiciary in a situation of ambiguity and pressure to decide these matters swiftly, resulting in putting less important effort in other important issues. The accused is the one who is under pressure with respect to civil and criminal cases filed altogether to give up under the pressure of legal positioning. Even though keeping all these things in mind, is it robust and possible to scrap the criminal proceedings altogether and create a new platform which can be easily misused?

It is indeed evident from the history of the cases in our country that the complainant has to wait along for a long period of time to get justice. But in this case the justice when delayed effects a complete cycle of business transaction, resulting in further litigation all along the path to the final consumer. Even though the civil remedy has its place in the legislation, there is still scope to create a pressure on the accused person to come clean and settle the case at any given point of time. It is only because of the criminal liability which tags along in case of dishonouring of cheque. Therefore, it can easily be said that it is only the criminal liability of the legislation which creates the pressure upon the accused, if guilty, to settle down the case and soon as possible and help in creating the cycle of business and commerce complete to its end. 

Written by Shravan Chandrashekher, Associate, H.K. Law Offices

Published by meghachaturvedi

Associate Partner, H.K. Law Offices

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