Government's decision to Decriminalize Section 138 of Negotiable Instruments Act is Right?

Jashan Chopra, Advocate
Punjab & Haryana High Court, Chandigarh
Assisted By, Aditya Chopra Law Student Rajiv Gandhi National University of Law, Patiala, Punjab
Mridula Chopra Law Student Guru Nanak Dev University, Amritsar
Kanav Chopra Law Student Punjab University, Chandigarh

Date : 13/07/2020
Location : House No. 628, Sector 11-B, Chandigarh
📱 +91 8699400068

Government's decision to Decriminalize Section-138 of Negotiable Instruments Act is Right?

(A statement from the Ministry in this regard said: "Criminalizing Procedural Lapses and Minor Non Compliances Increase Burden on businesses and it is essential to re-look at provision, which merely are procedural in nature and do not impact National Security and Public Interest at large.")

The law relating to negotiable instruments is not the law of one country or of one nation, it is the law of the commercial world in general, for, it consists of "certain principles of equity and usages of trade which general convenience and common sense of justice had established to regulate the dealing of merchants and mariners in all the commercial countries of the civilized world."

Sec.138 to Sec.145 were added to the Negotiable Instruments Act, 1881 by the Banking Public Financial Institutions and Negotiable Instruments Laws (Amendment) Act, 1988 (66 of 1988), S.4 (w.e.f.1.4.1989). (herein after to be referred to as "said amendment Act")

In fact the main object of said amendment Act was to promote confidence in Manufactures, Industrials Units and Traders and Creditors for making sales and lending money to various commercial concerns such as companies, partnership concerns, and proprietorship concerns etc. for the security of the amounts of the invoices/bills from the purchasers/debtors. Because whenever cheques of even date or post date are issued by the purchasers/debtors, to meet the amount of the invoices/bills of borrowed amount, there is implied assurance, promise and representation by the drawers of the cheques that on presentation of due date the cheques shall be honoured.

Prior to the said amendment Act there were no penal provision against dishonour of cheque and the sellers/creditors had to approach Civil Courts for recovering their amounts by filing suits and disposal of the suits take years and years for disposal of the suits and there was no time limit for the disposal of the suit and some time the debtors by adopting delaying tactics and average time for disposal of the such suit was about 5 years in the trial court and thereafter there was statutory remedy for the debtors by filing First Appeal in the District Court and Second Appeal in the High Court. Thus due to non payment of the purchase price or borrowed amounts many industrialists or Traders loose legs to stand because they had manufactured the material or purchase the materials by availing cash credit, Hypothecation limits from Banks and in case of not maintaining the same regularly on account of non payment of the purchase price or borrowed amount by the purchasers/debtors.

Sec.143 (2&3) of said amendment Act gave a mandate that the trial of complaint u/s 138 as for as practicable shall be continued from day to day till its conclusion subject to adjournment of the trial beyond the following date to be necessary for reasons to be recorded and further it has been provided that every endeavour shall be made to conclude the trial of the Complaint within 6 months from the date of filing the complaint.

Moreover, Sec. 139 gives rise to presumption that unless the contrary is proved, the issuing of cheque by the drawer shall be presumed to have been issued for discharge of the whole all in part of the debt or the other liability.

Thus, as per the scheme objects and reasons of the said amendment Act, the endeavour was made by the legislature (a) to increase confidence in the mind of industrialist, Manufacturers, Traders and lenders that in case the cheque is dishonoured then they can file complaint u/s 138 of the Amendment Act and would get their amount because Sec.138 cause terror in the mind of purchasers/debtors of punishment by way of imprisonment. Firstly the imprisonment was only for One year, which term was increased for two years by another amendment Act No.55 of 2002. (herein after to be referred to as "said second amendment Act")

Thus, no Mens-Rea is proved on part of the accused for dishonour of the cheque as Sec.139 raise the above said presumption that cheque has been issued by the accused for consideration mention therein.

In order to give chance to the drawers of cheque who could not get the cheque honoured even inspite of receipt of demand notice u/s 138, bench of three Hon'ble judges of Hon'ble Supreme Court in C.C. Alavi Haji v. Paplapetty Muhammed, Criminal Appeal No.767 of 2007 (SC) decided in 2007 cleanly provides that the accused/drawer who could not pay the amount of the cheque after receipt of notice, may pay the cheque amount within fifteen days from the service of summons of complaint and such drawer shall be absolved of any criminal liability. The aforesaid judgment of Hon'ble Supreme Court has given chance to honest Traders to comply with their commitment through cheque drawn by them. It is a great relief for the honest promissors.

Even a Bench of Three Hon'ble judges of Hon'ble Supreme Court in Damodar S. Prabhu v. Sayed Babalal H., Criminal Appeal No.963 of 2010 (SC), decided on 3.5.2010, has even provided that the offence u/s 138 can be compounded, in the Trial Court or Appellate Court or Hon'ble Supreme Court by paying the costs in the Trial Court to the extent of 10%, in the Appellate or Revisional Court to the extent of 20%, which again a leniency given to the honest drawers if they wish to make the cheque amount.

Further Hon'ble Supreme Court vide judgment in M/s Meters and Instruments Pvt. Ltd. v. Rakesh Kumar Midha, Criminal Appeal No.1732 of 2017 (SC), has given chance to honest Traders to make payment to the complainant/creditor and the courts are even competent to close the complaint on payment of cheque amount with compensatory amount even if the complainant is not believed. It has been further held in the said judgment that the offence u/s 138 is primarily is Civil Wrong.

Thus, the Hon'ble Supreme Court from time to time has rendered above said judgments to help the honest drawers and inspite of all the said convenience the drawers do not make the payments of the cheque amount and the decriminalization is made then:-

a. the Industrialist, Manufacturers, Creditors, Lenders and Traders would lose faith in the debtors and shall feel highly unsecured with respect to the payment or recovery of their hard earn money.

b. It would encourage the dishonest debtors/promissors to grab the hard earned money of the creditors and to let them to wait for the Judgment by Civil Court.

c. It is usual that dishonest debtors firstly do away with their attachable property and then incur legal liability to pay the cheque amount and thus the creditors through civil court will not be able to recover their hard earn money by attaching their properties of the debtors.

d. In this way the commerce shall decrease and the creditors would not advance and Traders shall not sell the material as they face would be shattered.

e. It is non fact that at present lakh and lakhs maters u/s 138 are pending in the courts in India and all would be further prolonged and the interpreters would be concluding that decriminalization would also render the pending cases to come to an end, irrespective of the fact that said matters are pending for the past 3/4 years.

Thus, decriminalization of offences u/s 138 of Negotiable Instruments is not advisable as it will damage the public at large and shattering its faith. The justice delayed amongst of denial of justice.

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