Negotiable instruments: Dishonour of cheque trial directions by Supreme Court

Dishonour of Cheques: directions for expeditious trial of cases.

Delay in cases for dishonour of cheques:

Background for direction:
An Association 174 banks/financial institutions as its members, which functions as think tank for banks in the matters of concern for the whole banking industry, raised issue of considerable national importance owing to the reason that in the era of globalization and rapid  technological developments, financial trust and commercial interest have to be restored. According to them the banking industry has been put to a considerable disadvantage due to the  delay in disposing of the cases relating to Negotiable Instruments Act. The Petitioner banks being custodian of public funds find it difficult to expeditiously recover huge amount of public fund which are blocked in cases pending under Section 138 of the Negotiable Instruments Act, 1881. Petitioners submitted that, in spite of the fact, Chapter XIV has been introduced in the Negotiable Instruments Act by Section 4 of the Banking, Public Financial Institutions and Negotiable Instruments Laws (Amendment) Act, 1988, to enhance the acceptability of cheques in settlement of liability by making the drawer liable for penalties 2014 in case of bouncing of cheques due to insufficiency of funds, the desired object of the Amendment Act has not been achieved.
Cheque, though acknowledged as a bill of exchange under the Negotiable Instruments Act and readily
accepted in lieu of payment of money and is negotiable, the fact remains that the cheque as a negotiable
instrument started losing its credibility by not being honoured on presentation.

Directions by Supreme Court about trial:

(1) Metropolitan Magistrate/Judicial Magistrate (MM/JM), on the day when the complaint under Section 138 of the Act is presented, shall scrutinize the complaint and, if the complaint is accompanied by the affidavit, and the affidavit and the documents, if any, are found to be in order, take cognizance and direct issuance of summons.

(2) MM/JM should adopt a pragmatic and realistic approach while issuing summons. Summons must be properly addressed and sent by post as well as by e-mail address got from the complainant. Court, in appropriate cases, may take the assistance of the police or the nearby Court to serve notice to the accused. For notice of appearance, a short date be fixed. If the summons is received back un-served, immediate follow up action be taken.

(3) Court may indicate in the summon that if the accused makes an application for compounding of offences at the first hearing of the case and, if such an application is made, Court may pass appropriate orders at the earliest.

(4) Court should direct the accused, when he appears to furnish a bail bond, to ensure his appearance during trial and ask him to take notice under Section 251Cr.P.C. to enable him to enter his plea of defence and fix the case for defence evidence, unless an application is made by the accused under Section 145(2) for re- calling a witness for cross-examination.

(5) The Court concerned must ensure that examination-in-chief, cross- examination and re-examination of the complainant must be conducted within three months of assigning the case. The Court has option of accepting affidavits of the witnesses, instead of examining them in Court. Witnesses to the complaint and accused must be available for
cross-examination as and when there is direction to this effect by the Court.

[Source: Indian Bank Association vs. Union of India (Supreme Court of India)]