Breaking: SC Issues Directions For Speedy Disposal Of Cheque Cases; Court Can Close Proceedings On Satisfaction Of Payment Of Cheque Amount, Cost & Interest [Read Judgment]

The Supreme Court has clarified that an accused in a case under Section 138 of Negotiable Instruments Act can be discharged even without the consent of the complainant, if the Court is satisfied that the complainant has been duly compensated.  It was also held that the normal role of criminal law that composition of offence is possible only with the consent of complainant/victim is not applicable for cases under Sec.138 of NI Act.  This was because the offence under Section 138 was ‘primarily a civil wrong’.  Therefore, the power under Section 258 of the Code of Criminal Procedure to stop trial and discharge the accused was available to the Magistrate even though the summary trial under Chapter XXI of Cr.P.C.

The bench consisting of Justices Adarsh Kumar Goel and Uday Umesh Lalit was dealing with the prayer of a person for compounding the offence or in the alternative for exempting from personal appearance. The appellant before the Supreme Court was the accused in the matter. Though the appellant was ready to pay the cheque amount along with interest and costs and thereby to compound the matter, the complainant did not consent to it and therefore the Magistrate proceeded with the matter without exempting personal appearance. The High Court refrained from interfering in the matter, in the light of judgment of the Supreme Court in JIK Industries Ltd v. Amarlal V.Jumani (2012) 3 SCC 255 which held that consent of the complainant was necessary for compounding the offence under Section 138 NI Act.

When the matter reached the Supreme Court, the Court revisited the principles under Section 138 cases, and appointed senior counsel Mr. K.V Viswanathan and Adv.Mr. Rishi Malhotra as amicus curiae to assist the Court in laying down guidelines in the matter. The Court noted that about 20% of cases in criminal courts were matters arising out of Sec.138, and the long pending arrears were choking the system. Hence, the need to encourage the parties to reach amicable settlement was emphasised. The Court also stated that the ultimate objective of the section was to lend credibility to cheque transactions, and to compensate the payee. The punitive element in cheque cases was not that predominant unlike other criminal cases.  The Court laid down the following guidelines with  regard to conduct of cases under Sec.138:-

1. Offence under Section 138 of the Act is primarily a civil wrong. Burden of proof is on accused in view presumption under Section 139 but the standard of such proof is “preponderance of probabilities”. The same has to be normally tried summarily as per provisions of summary trial under the Cr.P.C. but with such variation as may be appropriate to proceedings under Chapter XVII of the Act. Thus read, principle of Section 258 Cr.P.C. will apply and the Court can close the proceedings and discharge the accused on satisfaction that the cheque amount with assessed costs and interest is paid and if there is no reason to proceed with the punitive aspect. (emphasis supplied)


2. The object of the provision being primarily compensatory, punitive element being mainly with the object of enforcing the compensatory element, compounding at the initial stage has to be encouraged but is not debarred at later stage subject to appropriate compensation as may be found acceptable to the parties or the Court.


3. Though compounding requires consent of both parties, even in absence of such consent, the Court, in the interests of justice, on being satisfied that the complainant has been duly compensated, can in its discretion close the proceedings and discharge the accused. (emphasis supplied)


4. Procedure for trial of cases under Chapter XVII of the Act has normally to be summary. The discretion of the Magistrate under second proviso to Section 143, to hold that it was undesirable to try the case summarily as sentence of more than one year may have to be passed, is to be exercised after considering the further fact that apart from the sentence of imprisonment, the Court has jurisdiction under Section 357(3) Cr.P.C. to award suitable compensation with default sentence under Section 64 IPC and with further powers of recovery under Section 431 Cr.P.C. With this approach, prison sentence of more than one year may not be required in all cases.


5. Since evidence of the complaint can be given on affidavit, subject to the Court summoning the person giving affidavit and examining him and the bank’s slip being prima facie evidence of the dishonor of cheque, it is unnecessary for the Magistrate to record any further preliminary evidence. Such affidavit evidence can be read as evidence at all stages of trial or other proceedings. The manner of examination of the person giving affidavit can be as per Section 264 Cr.P.C. The scheme is to follow summary procedure except where exercise of power under second proviso to Section 143 becomes necessary, where sentence of one year may have to be awarded and compensation under Section 357(3) is considered inadequate, having regard to the amount of the cheque, the financial capacity and the conduct of the accused or any other circumstances.

The Bench also held that in every complaint under Section 138 of the Act, it may be desirable that the complainant gives his bank account number and if possible e-mail ID of the accused. If e-mail ID is available with the Bank where the accused has an account, such Bank, on being required, should furnish such e-mail ID to the payee of the cheque.

"In every summons, issued to the accused, it may be indicated that if the accused deposits the specified amount, which should be assessed by the Court having regard to the cheque amount and interest/cost, by a specified date, the accused need not appear unless required and proceedings may be closed subject to any valid objection of the complainant . If the accused complies with such summons and informs the Court and the complainant by e-mail, the Court can ascertain the objection, if any, of the complainant and close the proceedings unless it becomes necessary to proceed with the case. In such a situation, the accused’s presence can be required, unless the presence is otherwise exempted subject to such conditions as may be considered appropriate. The accused, who wants to contest the case, must be required to disclose specific defence for such contest. It is open to the Court to ask specific questions to the accused at that stage. In case the trial is to proceed, it will be open to the Court to explore the possibility of settlement. It will also be open to the Court to consider the provisions of plea bargaining. Subject to this, the trial can be on day to day basis and endeavour must be to conclude it within six months. The guilty must be punished at the earliest as per law and the one who obeys the law need not be held up in proceedings for long unnecessarily".

The Bench also said it is open to the High Courts to consider and lay down category of cases where proceedings or part thereof can be conducted online by designated courts or otherwise. The High Courts were also directed to consider issuing any further updated directions for dealing with Section 138 cases in the light of judgments of this Court.