2014 (5) TMI 750 - SC - Companies Law

Procedure to try complaint under Section 138 of the Negotiable Instruments Act, 1881 - Petitioner banks being custodian of public funds find it difficult to expeditiously recover huge amount of public fund which are blocked in cases pending under Section 138 - Scope of Section 145 - Held that - The scope of Section 145 came up for consideration before this Court in Mandvi Cooperative Bank Limited v. Nimesh B. Thakore 2010 (1) TMI 570 - SUPREME COURT OF INDIA , and the same was explained in that judgment stating that the legislature provided for the complainant to give his evidence on affidavit, but did not provide the same for the accused. The Court held that even though the legislature in their wisdom did not deem it proper to incorporate a word accused with the word complainant in Section 145(1), it does not mean that the Magistrate could not allow the complainant to give his evidence on affidavit, unless there was just and reasonable ground to refuse such permission. Section 145(1) gives complete freedom to the complainant either to give his evidence by way of affidavit or by way of oral evidence. The Court has to accept the same even if it is given by way of an affidavit. Second part of Section 145(1) provides that the complainant s statement on affidavit may, subject to all just exceptions, be read in evidence in any inquiry, trial or other proceedings. Section 145 is a rule of procedure which lays down the manner in which the evidence of the complainant may be recorded and once the Court issues summons and the presence of the accused is secured, an option be given to the accused whether, at that stage, he would be willing to pay the amount due along with reasonable interest and if the accused is not willing to pay, Court may fix up the case at an early date and ensure day-to-day trial. Few High Courts of the country have laid down certain procedures for speedy disposal of cases under Section 138 of the Negotiable Instruments Act - It is directed to all Criminal Courts in the country dealing with Section 138 cases to follow the above-mentioned procedures for speedy and expeditious disposal of cases falling under Section 138 of the Negotiable Instruments Act. - Decided in favour of assessee.

Issues Involved:
1. Guidelines for summary trial of complaints under Section 138 of the Negotiable Instruments Act, 1881.
2. Compliance with guidelines for summary trial and reporting to the Supreme Court.
3. Legislative and policy changes for expeditious disposal of cheque dishonor cases.

Detailed Analysis:

1. Guidelines for Summary Trial of Complaints under Section 138 of the Negotiable Instruments Act, 1881:

The petitioners, including the Indian Banks' Association and Punjab National Bank, sought the Supreme Court's intervention to lay down appropriate guidelines for the summary trial of complaints under Section 138 of the Negotiable Instruments Act, 1881. They emphasized the considerable disadvantage faced by the banking industry due to delays in disposing of such cases, which hinders the recovery of public funds blocked in pending cases. The petitioners highlighted the legislative intent behind the amendments to the Act, particularly the introduction of Sections 143 to 147, aimed at speedy disposal and making the offense compoundable.

The Supreme Court reiterated the objectives of Section 138, which is to ensure that cheques are honored and to provide a criminal remedy for dishonor due to insufficiency of funds. The Court cited previous judgments underscoring the importance of maintaining the credibility of cheques in commercial transactions and the need for a robust mechanism to deal with dishonored cheques.

2. Compliance with Guidelines for Summary Trial and Reporting to the Supreme Court:

The Court underscored the legislative intent behind Section 143, which allows for the summary trial of cases under Section 138, and the procedural provisions under Sections 262 to 265 of the Criminal Procedure Code (Cr.P.C.). The Court noted that Section 145 permits the complainant to give evidence by affidavit, which should be read in evidence at both pre-summoning and post-summoning stages, thus avoiding the need for the complainant to be examined twice.

The Court provided detailed directions for the Metropolitan Magistrate/Judicial Magistrate (MM/JM) to follow for the summary trial of Section 138 cases. These include scrutinizing the complaint and accompanying affidavit, issuing summons pragmatically, ensuring proper service of summons, facilitating early compounding of offenses, and conducting examination-in-chief, cross-examination, and re-examination of the complainant within three months.

3. Legislative and Policy Changes for Expeditious Disposal of Cheque Dishonor Cases:

The petitioners also sought a writ of mandamus directing the respondents to adopt necessary policy and legislative changes to expedite the disposal of cheque dishonor cases. The Court acknowledged the legislative amendments made by the Negotiable Instruments (Amendment and Miscellaneous Provisions) Act, 2002, which aimed to address the deficiencies in Sections 138 to 142 and introduced Sections 143 to 147 for faster case disposal.

The Court emphasized the need for uniform practices across various Magistrate Courts to achieve the legislative intent. It referred to the guidelines laid down by various High Courts and directed all Criminal Courts in the country to follow similar procedures for the speedy and expeditious disposal of Section 138 cases.

Conclusion:

The Supreme Court provided comprehensive guidelines for the summary trial of complaints under Section 138 of the Negotiable Instruments Act, 1881, to ensure the expeditious disposal of cheque dishonor cases. The directions included procedural steps for scrutinizing complaints, issuing summons, facilitating compounding of offenses, and conducting trials within specified timeframes. The Court's directions aim to restore financial trust and commercial interest by addressing delays in the judicial process related to dishonored cheques. The writ petition was disposed of with these directives to be followed by all Criminal Courts dealing with Section 138 cases.

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