S.138 NI Act: SC Directs RBI To Consider Developing A New Proforma Cheque To Include Purpose Of Payments [Read Order]

The Supreme Court has recently asked The Reserve Bank of India to consider developing a new proforma of cheques so as to include the purpose of payment, along with other informations to facilitate adjudication of real issues in cheque bounce cases.

"With ensuring the credibility of cheques, it is equally important that cheques are not allowed to be misused giving cause to frivolous litigation. The Reserve Bank of India may consider developing a new proforma of cheques so as to include the purpose of payment, along with other informations mentioned above to facilitate adjudication of real issues."

The bench of CJI SA Bobde and Justice L. Nageswara Rao observed thus in its order registering suo motu writ petition to to evolve a mechanism for expeditious adjudication of Cheque bounce cases.

The Bench also observed that an information sharing mechanism may be developed where the banks share all the requisite details available of the accused, who is the account holder, with the complainant and the police for the purpose of execution of process. This may include a requirement to print relevant information, viz the email id, registered mobile number and permanent address of the account holder, on the cheque or dishonour memo informing the holder about the dishonour

"The Reserve Bank of India, being the regulatory body may also evolve guidelines for banks to facilitate requisite information for the trial of these cases and such other matters as may be required. A separate software-based mechanism may be developed to track and ensure the service of process on the accused in cases relating to an offence under Section 138 of N.I. Act.

The Reserve Bank of India, being the regulatory body may also evolve guidelines for banks to facilitate requisite information for the trial of these cases and such other matters as may be required. A separate software-based mechanism may be developed to track and ensure the service of process on the accused in cases relating to an offence under Section 138 of N.I. Act"

Summons Through E-mail

The Court noted that in Indian Bank Association & others v. Union of India and ors., (2014) 5 SCC 590, it was held that Magistrate should adopt a pragmatic and realistic approach while issuing process to ensure the presence of the accused. The bench, in this regard, said:

"Taking effect from Section 144 of the Act, Sections 62, 66 and 67 of Cr.P.C. and directions of this Court, the Magistrate may opt for one or many of the methods of service of summons, including service through speed post or the courier services, Police Officer or any other person, e-mail or through a Court having territorial jurisdiction. "

In Indian Bank Association case, the Supreme Court has issued the following guidelines for speedy disposal of cases under Section 138 of Negotiable Instruments Act.

• 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.
• 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 is fixed. If the summons is received back un-served, immediate follow up action be taken.
• 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.
• 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 251 Cr.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.
• 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.

Attachment of Property

The Bench has also observed that a mechanism may be developed to ensure the presence of the accused even by way of coercive measure, if required, taking effect from Section 83 of Cr.P.C. which allows attachment of property, including movable property. A similar co-ordinated effort may be evolved to recover interim compensation under Section 143A of the N.I. Act as well as fine or compensation to be recovered as per Section 421 of Cr.P.C. The Bank may facilitate mechanism for transferring requisite funds from the bank account of the accused to the account of the holder in due course, as may be directed by the Court.

Pre-Litigation Settlement

The Bench also suggested that with ever growing institution of N.I. cases, there is a need of developing a mechanism for pre-litigation settlement in these cases. The Legal Services Authorities Act, 1987 provides for a statutory mechanism for disposal of case by Lok Adalat at pre-litigation stage under Sections 19 and 20 of the Act. Further, Section 21 of the Act, recognises an award passed by Lok Adalats as a decree of a civil court and gives it a finality.

"The effect of above legal proposition is that an Award passed at the pre-litigation stage or pre-cognizance stage shall have an effect of a civil decree. The National Legal Services Authority, being the responsible Authority in this regard, may evolve a scheme for settlement of dispute relating to cheque bounce at pre-litigation i.e. before filing of the private complaint. This measure of prelitigation ADR process can go a long way in settling the cases before they come to Court, thereby reducing docket burden".

Special Courts

"The High Courts, in addition to the above, may also consider setting up of exclusive courts to deal with matters relating to Section 138, especially in establishments where 8 the pendency is above a standard figure. Special norms for assessment of the work of exclusive courts may also be formulated giving additional weightage to disposal of case within the time-frame as per legal requirement"

The Bench observed that to work out mechanism for expeditious and just adjudication of cases relating to dishonour of cheques, fulfilling the mandate of law and reduce high pendency, various duty-holders like Banks, Police and Legal Services Authorities may be required to take measures and prepare schemes.

"Thus, we find it necessary to hear them for evolving a concerted, coordinated mechanism for expeditious adjudication of these cases as per the legal mandate".

The Court has appointed Shri Sidharth Luthra, Senior Advocate as Amicus Curiae and Advocate Shri K. Parameshwar to assist him in the matter.

The Court has issued  notice to the Union of India through Law Secretary, Registrar General of all the High Courts, the Director General of Police of all the States and Union Territories, Member Secretary of the National Legal Services Authority, Reserve Bank of India and Indian Bank Association, Mumbai as the representatives of Banking institutions.

Next hearing of the case is 23. on 16.04.2020.

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