Why Not Close Cheque Cases With Amount Below A Certain Limit? Supreme Court Asks Centre, States & Banks

Expressing concerns at the huge volume of cases for dishonour of cheque under Section 138 of the Negotiable Instruments Act clogging the courts system, the Supreme Court on Wednesday suggested the formation of a policy for closure of cases of banks and financial institutions involving amount below a certain limit. The Court suggested that such policy can exempt the complaints filed by private parties.

A Bench comprising Justice Nageswara Rao, Justice BR Gavai and Justice Ravindra Bhat orally asked the Centre and State Governments to come up with a policy in this regard, after an analysis to be undertaken by the banking sector, preferably the Indian Banks Association (IBA). 

The Bench observed that most of the pending cases involve cheques of small amounts, making the effort being put in by the judicial and banking system disproportionate to the amounts to be recovered.

"If the effort that system and banks and lawyers are putting in is disproportionate amount to be recovered, is it not a case made out for writing off or closing those cases below a certain limit, like 10,000 or 15,000?", Justice Ravindra Bhat asked.

The bench made the observation as a suggestion for declogging of the courts, as each hearing in these cases is a cost on both the court system and the public exchequer. It further clarified that the suggestion is only with regard to institutional complaints and not private complaints.

The suggestion came in response to the submission by the Amicus Curiae Senior Advocate Sidharth Luthra that the States of Maharashtra, Delhi Rajasthan, UP and Gujarat are states with highest pendency of cases under the NI Act, and a pilot project for constitution of special courts may be implemented in their districts.

Justice Bhat observed that while the number of pending cases in the states are ranging from figure of 5 lakhs to10 lakhs, a large number of these cases are small cheques.

"Like we say in tax cases, if tax effect is less than an amount, Union of India won't file appeal. Why not adopt that and de-clog our courts? Because I'm sure each date of hearing will be a cost on system, system as a whole, on the courts system and the public exchequer. I'm talking of tangible costs", Justice Bhat said.

Responding to Justice Bhat's suggestion, Amicus Curiae Luthra stated that, one option can be to subject transactions below certain amounts to electronic payment(RTGS), so that the cheque business can be done away with. 

He suggested that an amount limit of 10,000 or 15,000 can be fixed, below which there will be no prosecution. The process can them be examined periodically to see if the number of cases has reduced.

"We can limit the amount and make it RTGS which is for union to come up with a scheme it will actually take a whole gamut of cases as this is destroying the criminal justice system", the Amicus suggested.

Additional Solicitor General SV Raju said that banks and financial institutions entrust bulk cases to lawyers for recovery of loan instalments. Cheques are often taken as security for loans.

The bench was considering its suo moto case In re Expeditious Trial of Cases Under Section 138 NI Act. The Bench has directed the Centre and the States to respond to the suggestions made by the Amicus Curiae. The Bench also called for the response of the High Courts. The matter will be next considered on May 12.

It was on March 7 last year that the bench of CJI Bobde and Justice L Nageswara Rao registered the suo moto case to devise methods for expeditious trial of Section 138 NI Act cases.

Also Read : Appointing Retired Judges To Clear Cheque Bounce Cases : Supreme Court Seeks Views Of Centre, States & HCs [Read Amicus Report]

Case Title : In Re Expeditious Trial Of Cases Under Section 138 of N.I Act

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