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Special court mooted to curb cheque-dishonour

The Associated Chambers of Commerce and Industry of India, or ASSOCHAM, has suggested the establishment of a special court and amendment to the Negotiable Instruments Act to minimise litigation arising out of dishonouring of cheques.

In a representation to the Minister of Law, Justice and Company Affairs, ASSOCHAM stated that over Rs 50 billion has been blocked in Bombay alone because of the lacunae in section 138 of the Negotiable Instruments Act, which makes it difficult to prosecute the creditor if he dodges the law and fails to make justified payments.

ASSOCHAM suggested that all pending cases in the court of magistrates should be transferred to the special court from the date of amendment to the Act. To cover the expenses of the special court, a small percentage of the amount involved in the dishonoured cheques should be fixed to cover expenses of special courts.

The special court should have its own machinery to execute the order relating to service of notice/summons/warrants to the witness/accused person.

ASSOCHAM said that the special court should have statutory powers to direct the accused to deposit the entire cheque amount and furnish the valid security to its satisfaction in respect of the amount covered under the dishonoured cheques.

The time period for settlement of the case should be fixed at one year from the date of filing of the complaint and any extension of such period should be by an appellate court by another period of six months.

Also, the power of the special court should be unlimited in imposing fine as a deterrent measure, since the metropolitan magistrate or magistrate or magistrate first class has limited powers to impose fine.

ASSOCHAM said the special court should be empowered to immediately go for attachment of the properties of the drawer as well as other persons relating to the business transactions on sufficient proof. Provisions made in Criminal Law Amendment (Ordinance) 1944 Act should, pari-passu, apply.

At present a transaction under section 138 of the Negotiable Instruments Act presupposes that the dishonoured cheque was issued for the discharge, in whole or in part, of debt or other liability. This is in conflict with the provisions of section 118 (a) of the Negotiable Instruments Act where it has been stipulated that any negotiable instrument, including cheques, is issued for a consideration. And the Act suggests that the provision under section 118(a) will apply unless the contrary is proved.

A period of 15 days from the date of receipt of bank's advice regarding non-payment of cheque has been stipulated for issuing notice to the drawer of the cheque. This goes to the advantage of the drawer of the cheque.

In the case of unpaid/bounced post-dated cheques where the value of the cheque exceeds the liability amount in terms of interest, etc, the creditor can delay prosecution on the plea that the cheque was issued as a collateral security and not for discharge of any particular liability. Such a plea is often accepted by the court keeping in view the provision of section 138.

ASSOCHAM, therefore, suggested that the provision that 118(a) will apply unless contrary is proved should be deleted and replaced by a provision that whenever any cheque is returned by the bank unpaid for any ground, on compliance of other provisions relating to notice, and in the event of the failure on the part of the drawer of the cheque to pay up the full amount covered by the cheque, the person concerned will be held guilty of the violation of the provisions of section 138 of the Act and should be proceeded with and punished accordingly.

Further, section 138 of Negotiable Instruments Act should provide for provisions for condoning the delay on valid grounds if the notice in terms section 138 of the Act is not issued within the period of 15 days as provided in the Act.

UNI

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