Supreme Court’s Directions In RE Expeditious Trial Of Cases under section 138 NI Act: CASE ANALYSIS

The Constitutional Bench of Hon’ble Supreme Court of India directed all the high courts across the country to issue guidelines for trial courts to deal with cheque bounce cases u/s 138 NI Act in compliance with present judgement passed in a Suo moto writ petition (Crl. No. 2 of 2020) in case titled as Re: EXPEDITIOUS TRIAL OF CASES UNDER SECTION 138 NI ACT 1881.

BRIEF FACTS:

Special Leave Petition (Criminal) No. 5464 of 2016 pertains to dishonour of two cheques on 27.01.2005 for an amount of Rs.1,70,000/-. The dispute has remained pending for the past 16 years. Concerned with the large number of cases filed under Section 138 of the Negotiable Instruments Act, 1881 (hereinafter ‘the Act’) pending at various levels, a Division Bench of this Court consisting of the Chief Justice of India and L. Nageswara Rao, J. decided to examine the reasons for the delay in disposal of these cases. The Registry was directed to register a Suo Motu Writ Petition (Criminal) captioned as “Expeditious Trial of Cases under Section 138 of N.I. Act 1881”, which was listed before the Constitutional Bench. Mr. Sidharth Luthra, learned Senior Counsel was appointed as Amicus Curiae and Mr. K. Parameshwar, learned Counsel was requested to assist him.

LEGAL POSITION:

Chapter XVII inserted in the Negotiable Instrument Act, containing Sections 138 to 142, came into force on 01.04.1989. Dishonour of cheques for insufficiency of funds was made punishable with imprisonment for a term of one year or with fine which may  extend to twice the amount of the cheque as per Section 138. Section 139 dealt with the presumption in favour of the holder that the cheque received was for the discharge, in whole or in part, of any debt or other liability. The defence which may not be allowed in a prosecution under Section 138 of the Act is governed by Section 140. Section 141 pertains to offences by companies. Section 142 lays down conditions under which cognizance of offences may be taken under Section 138. Over the years, courts were inundated with complaints filed under.  Section 138 of the Act which could not be decided within a reasonable period and remained pending for a number of years.

PENDING LITIGATION U/S 138 NI ACT:

This gargantuan pendency of complaints filed under Section 138 of the Act has had an adverse effect in disposal of other criminal cases. There was an imminent need for remedying the situation which was addressed by the Negotiable Instruments (Amendment and Miscellaneous Provisions) Act, 2002. Sections 143 to 147 were inserted in the Act, which came into force on 06.02.2003. Section 143 of the Act empowers the court to try complaints filed under Section 138 of the Act summarily, notwithstanding anything contained in the Code of Criminal Procedure, 1973 (hereinafter, ‘the Code’). Sub-section (3) of Section 143 stipulates that an endeavour be made to conclude the trial within six months from the date of filing of the complaint. Section 144 deals with the mode of service of summons. Section 145 postulates that the evidence of the complainant given by him on affidavit may be read as evidence in any inquiry, trial or other proceeding under the Code. Bank’s slip or memo denoting that the cheque has been dishonoured is presumed to be prima facie evidence of the fact of dishonour of the cheque, according to Section 146. Section 147 makes offences punishable under the Act compoundable.

The situation has not improved as courts continue to struggle with the humongous pendency of complaints under Section 138 of the Act. The preliminary report submitted by  the learned Amici Curiae shows that as on 31.12.2019, the total number of criminal cases pending was 2.31 crores, out of which 35.16 lakh pertained to Section 138 of the Act. The reasons for the backlog of cases, according to the learned Amici Curiae, is that while there is a steady increase in the institution of  complaints every year, the rate of disposal does not match the rate of institution of complaints. Delay in disposal of the complaints under Section 138 of the Act has been due to reasons which we shall deal with in this order.

RECOMMENDATIONS BY THE AMICUS CURIAE

The learned Amicus Curiae identified seven major issues from the responses filed by the State Governments and Union Territories which are as under:

a) Service of summons

b) Statutory amendment to Section 219 of the Code

c) Summary trials

d) Attachment of bank accounts

e) Applicability of Section 202 of the Code

f) Mediation

g) Inherent jurisdiction of the Magistrate

The learned Amici Curiae has brought to the notice of this Court that summary trials are routinely converted to summons trials in a mechanical manner.

OBSERVATIONS BY THIS HON’BLE COURT:

The Hon’ble Court directed to form a Committee with Hon’ble Mr. Justice R.C. Chavan, former Judge of the Bombay High Court, as the Chairman to consider various suggestions that are made for arresting the explosion of the judicial docket. The recommendations made by the Ld. Amici Curiae relating to attachment of bank accounts to the extent of the cheque amount, pre-summons mediation and all other issues which are part of the preliminary note and the written submissions of the learned Amici Curiae shall be considered by the aforementioned Committee, in addition to other related issues which may arise during such consideration. The Committee is directed to deliberate on the need for creation of additional courts to try complaints under Section 138 of the Act.

Further, on the argument of mechanical conversion of summary trial or summon trial by Magistrate, the Hon’ble Court accepted the suggestions made by the learned Amici Curiae in consultation with the High Courts. The High Courts may issue practice directions to the Magistrates to record reasons before converting trial of complaints under Section 138 from summary trial to summons trial in exercise of power under the second proviso to Section 143 of the Act.

Further, the Hon’ble Court agreed upon the suggestion made by Ld. Amicus Curiae of allowing one trial for multiple offences of the same kind within the space of 12 months in respect of complaints under Section 138 NI Act. Accordingly, the High Courts are requested to issue practice directions to the Trial Courts to treat service of summons in one complaint forming part of a transaction, as deemed service in respect of all the complaints filed before the same court relating to dishonour of cheques issued as part of the said transaction.

The Hon’ble Court has done a close scrutiny of the judgments of this Court in Adalat Prasad v. Rooplal Jindal & Ors.[1] and Subramanium Sethuraman v. State of Maharashtra & Anr [2] which showed that they do not warrant any reconsideration. The Trial Court cannot be conferred with inherent power either to review or recall the order of issuance of process. This Court, in its anxiety to cut down delays in the disposal of complaints under Section 138, has applied Section 258 to hold that the Trial Court has the power to discharge the accused even for reasons other than payment of compensation. However, amendment to the Act empowering the Trial Court to reconsider/recall summons may be considered on the recommendation of the Committee constituted by this Court which shall look into this aspect as well.

RATIO OF JUDGEMENT

The Constitutional Bench of Hon’ble Supreme Court has concluded the following:

1) The High Courts are requested to issue practice directions to the Magistrates to record reasons before converting trial of complaints under Section 138 of the Act from summary trial to summons trial.

2) Inquiry shall be conducted on receipt of complaints under Section 138 of the Act to arrive at sufficient grounds to proceed against the accused, when such accused resides beyond the territorial jurisdiction of the court.

3) For the conduct of inquiry under Section 202 of the [Criminal Procedure ] Code, evidence of witnesses on behalf of the complainant shall be permitted to be taken on affidavit. In suitable cases, the Magistrate can restrict the inquiry to examination of documents without insisting for examination of witnesses. 

4) We recommend that suitable amendments be made to the Act for provision of one trial against a person for  multiple offences under Section 138 of the Act committed within a period of 12 months, notwithstanding the restriction in Section 219 of the [Criminal Procedure ] Code.

5) The High Courts are requested to issue practice directions to the Trial Courts to treat service of summons in one complaint under Section 138 forming part of a transaction, as deemed service in respect of all the complaints filed before the same court relating to dishonour of cheques issued as part of the said transaction.

6) Judgments of this Court in Adalat Prasad and Subramanium  Sethuraman have interpreted the law correctly and we reiterate that there is no inherent power of Trial Courts to review or recall the issue of summons. This does not affect the power of the Trial Court under Section 322 of the [Criminal Procedure ] Code to revisit the order of issue of process in case it is brought to the court’s notice that it lacks jurisdiction to try the complaint.

7) Section 258 of the Code is not applicable to complaints under Section 138 of the Act and findings to the contrary in Meters and Instrument[3] do not lay down correct law. To conclusively deal with this aspect, amendment to the Act empowering the Trial Courts to reconsider/recall summons in respect of complaints under Section 138 shall be considered by the Committee constituted by an order of this Court dated 10.03.2021.

8) All other points, which have been raised by the Amici Curiae in their preliminary report and written submissions and not considered herein, shall 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


[1] 2004) 7 SCC 338

[2] (2004) 13 SCC 324

[3] Meters and Instruments Private Limited and Another v. Kanchan Mehta (2018) 1 SCC 560


Written By Sanjay Chavre, Intern, H.K. Law Offices

Published by meghachaturvedi

Associate Partner, H.K. Law Offices

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