Losing tractionCheque transactions
Allowing courts to make summary convictions and discouraging the use of cheques can help reduce the huge pile-up of cases
The Supreme Court recently came out with a slew of directions to ensure speedy disposal of cheque-bounce cases. The court referred to a recent study that revealed more than 35 lakh cheque-bounce cases are pending, constituting more than 15 per cent of the total criminal cases pending in district courts.
The issue of prolonged litigation with respect to dishonoured cheques came to the court’s notice when it was hearing a case dating back to 2005 recently.
The apex court has said that the evidence in cheque dishonour cases can now be tendered by filing affidavits and there would be no need to examine witnesses physically. The court has asked the Centre to make “suitable amendments” in the Negotiable Instruments Act to ensure that trials in cheque-bounce cases lodged in 12 months against a person can be clubbed together into one consolidated case.
Until 1989, failure to discharge the liability of a payment through cheque was only a civil liability. By amending Section 138 of Negotiable Instruments Act 1881, the civil liability was converted as a criminal liability.
The objective of introducing Section 138 was to encourage the culture of using cheques and enhance the credibility of the instrument. It was also to inculcate faith in the efficacy of banking operations by making the issuer of the cheque liable for penalties in case it is dishonoured. Due care has also been taken to prevent harassment of honest drawers of cheque.
Prior to this, the drawer of a dishonoured cheque could only be criminally prosecuted under Section 420 of the Indian Penal Code (for offence of cheating).
To convict persons under Section 420, the prosecution had to establish dishonest intention on the part of the issuer of the cheque from the inception of the cheque and just because the cheque is dishonoured the crime of cheating is not established.
However, under Section138 of the NI Act if a cheque is dishonoured for insufficient funds, the offence under the Act is constituted, notwithstanding the intention of the person issuing the cheque.
But as observed by the Supreme Court, Indian courts are riddled with the colossal problem of pending cases. This defeats the very purpose of making cheque return a criminal offence, and the credibility of the cheque system is seriously affected.
The existing legal provisions contain sufficient safeguards like issuing of notice of dishonour by the beneficiary within 30 days, 15 days’ time for the issuer to make the payment and one-month time to file complaint for the beneficiary.
The introduction of Section 138 initially enhanced the credibility of the usage of cheques. Casual way of issuing cheques has been arrested to a large extent. Hence measures are required to speed up the settlement of cheque-bounce cases; faster conviction will be a deterrent to offenders.
As suggested by the Supreme Court, additional courts can be established. But this will involve huge costs and logistic issues too. There are other measures that can also be considered.
The beneficiary of the returned cheque always files a criminal case with sufficient documentary proof like returned cheque and return memo from the drawee bank. Hence just on scrutinising the documents, the court can decide about the conviction of the issuer of the cheque, without providing any scope for prolonging the case.
In a way, there can be automatic (summary) conviction.
This can be done by making suitable amendments to the legal provisions. It is also possible to create a database for cheques returned by banks with facility of verification by government agency or court for confirmation before conviction.
Issue of bailable or non-bailable warrant, based on the documentary evidence, can also discourage people issuing cheques without funds.
It is possible to restrict the usage of cheques itself. When there are digital payments like NEFT, IMPS, RTGS, etc., that are available 24x7x365, the system of issuing cheques can be restricted for smaller payments. By suitable amendment to Negotiable Instruments Act, the amount that can be transacted through cheque can be restricted.
It is also possible to make cheque transactions costly by levying appropriate charges for any transaction through cheque. This will automatically migrate people to the digital payment system.
Banks are incurring huge cost for providing cheque facility to the customers and also for clearing huge volume of cheques through the Cheque Truncation System.
When 20 of the 27 EU member-states have effectively eliminated cheques, with usage down to two cheques per capita per annum, India, with strong mobile phone and internet penetration, should be able to move to paperless bank transaction smoothly.
The writer is a retired banker