Guide2Lawyers.
DISHONOUR OF CHE-QUES.
A CASE FOR REPEAL OF S.138 AND ALLIED SECTIONS OF THE NEGOTIABLE INSTRUMENTS ACT
A cheque being dishonoured was not by itself treated as a criminal offence, a decade and a half ago. Prosecution of drawer [issuer] of the bounced cheque was possible only under section 420 Indian Penal code provided the complainant could establish that the issuer of the cheque intentionally deceived the complainant knowing that the cheque would be dishonoured for inadequacy of funds in his bank account.
The law was amended with effect from 1-4-1989 to make cheque bouncing for inadequacy of funds an offence, if the drawer fails to pay the amount mentioned in the cheque within 15 days from the date of notice of dishonour of cheque. Though the Act does not stipulate minimum period of imprisonment and no minimum fine is prescribed, a recent judgement of Supreme Court [reported in 2002 AIR S.C.W P.298] has made the imposition of deterrent jail sentence MANDATORY unless the amount is paid in full by the date of the sentence. The result is that there has been a sharp increase in the number of cases filed under this provision (here in after called the new law) and a corresponding decline in the number of civil suits for recovery of money. Though creditors seeking the recovery of money are happy as it has become easier and cheaper to recover the dues, the following reasons maybe cited to contend that this new law is unjust and even counter productive:
1. The new law does not make any distinction between the dishonoured cheque, which is issued knowing that it would bounce and a post dated cheque, which is issued in the honest anticipation of arrival of funds at the account of the issuer. Almost all business is done with the expectation of profit and not with assurances of profit. By accepting a post dated cheque, the payee also knows that there is a risk of it being dishonoured as it is not a draft. Risk is inherent in any business and even the Usurious Loans Act recognises this when it permits high risk loans to carry compound interest. By punishing the debtor for non-payment of debt, the fundamental dictum that breach of contract should not be punished is violated. Civilised societies do not treat breach of contracts as culpable wrong. The International Covenant on human rights also insists on not punishing mere breach of contract.Q[See foot note for details]
2. The aims and objects of the amendment are not clear. If the Parliament thought that precious time of the banks was wasted in processing cheques, which would ultimately be dishonoured, the banks might have been empowered to charge a process fee for every cheque that is presented for payment or collection, at the time of its presentation itself. Section 147 of the Negotiable Instruments Act has made the new offence compoundable. It means that the creditor and debtor can compromise the matter, without allowing the bank to have any say in it
3. For the recovery of money when civil suits are filed, the creditor has to pay court fee and the burden of judicial administration will be ultimately transferred to the debtor, the wrongdoer, in the form of suit costs. However, for prosecutions under the N.I.Act, no court fee is to be paid. The cost of administration is ultimately borne by the taxpayer for the default committed by the debtor.
4. Almost all creditors are misusing the new law by obtaining post-dated cheques from the borrowers before disbursing the loans. Borrowers are unable to resist the compulsive issuance of cheques due to their ignorance and also their vulnerability due to the exigent circumstances. One must not forget that laws like the Usurious Loans Act, The Agriculturists Debt Relief Act, protect the borrower in view of his vulnerable position despite his agreeing to pay high rate of interest at the time of borrowing.
5. A civil court will not send the debtor to jail unless it is satisfied that he has adequate means to repay the debt and is wilfully defaulting in payment of money. No such restraint is exercised in a prosecution under the new law, by the criminal court after the Supreme Court judgement making lengthy incarceration compulsory unless the due amount is paid. The psychological trauma suffered by the unfortunate debtor who is surely to be sent to jail for a non-fulfilment of a contractual obligation is unimaginable. Some sensitive debtors may even be driven to suicide. If the Parliament wanted to preserve the sanctity of cheques, a mere fine would have been sufficient. By insisting on payment of cheque amount, a civil wrong of non-payment of debt has been converted into a criminal offence and an unjust short cut is provided to the creditors.
6. The offence of dishonour of cheque is deemed to have been committed the moment the issuer of a cheque fails to make payment of the amount covered by cheque within 15 days from the date of either actual or deemed service of notice. A false endorsement of refusal of notice obtained with the connivance of the postman is all that is required to send the accused to jail. It should be borne in mind that even if the entire amount is paid after the prosecution is filed, it does not entitle the debtor to acquittal or light punishment. Drawers of the cheques are now at the mercy of postmen.
7. The cheque bounce cases are increasing the workload of the already overburdened criminal courts and the police who are called upon to serve summons and execute arrest warrants. The recent addition of section 144 to the N.I.Act only gives discretion to the court to order SUMMONS by post. Until the required bribe is paid the police are not showing interest in serving the summons and in executing the arrest warrants.
The REMEDY:
The remedy is to repeal the law, which makes dishonour of cheques an offence. The regular civil courts must be made to pursue the suits on a day-to-day basis as prescribed by order 17 Civil Procedure Code. In the event of insolvency, the functioning of the official receivers may be monitored more tightly. Alternatively, the power of the magistrate to impose a sentence of imprisonment has to be restricted to those cases where the accused issued the cheque with the knowledge that it would be certainly dishonoured.
About the Author
The author, g.v.desai, is a trial court lawyer at Adoni in Kurnool district of Andhra Pradesh, India.
No comments:
Post a Comment