Supreme Court Directs Speedy Trial and Streamlined Procedures for Cheque Dishonour Cases under Section 138 of Negotiable Instruments Act

Bench issues comprehensive guidelines for expeditious disposal of cases, endorses evidence on affidavit, and emphasizes pragmatic approach by courts to restore financial trust and reduce litigation backlog

In a landmark judgment delivered on April 21, 2014, the Supreme Court of India in the case of Indian Bank Association and others vs. Union of India and others (Writ Petition (Civil) No. 18 of 2013) has laid down detailed directions aimed at expediting the trial and disposal of cases arising out of dishonour of cheques under Section 138 of the Negotiable Instruments Act, 1881. The petition was filed by the Indian Bank Association (IBA), along with Punjab National Bank and others, highlighting the growing concern over delays in cheque dishonour cases and the consequent impact on the banking sector and public funds recovery.

The Court underscored the importance of maintaining the credibility of cheques as negotiable instruments crucial to commercial and financial transactions in India. It reiterated the objective of Section 138, which is to prevent misuse of cheques as instruments of dishonesty and to ensure that drawers honour their financial obligations. The Court observed that despite legislative amendments, including the introduction of summary trial procedures under Sections 143 to 147 by the 2002 Amendment, courts across the country have not uniformly implemented these provisions, leading to significant pendency and delay.

Key Highlights of the Judgment:

1. Summary Trial and Speedy Disposal:

The Court emphasized that offences under Chapter XVII of the Negotiable Instruments Act should be tried summarily by Judicial Magistrates or Metropolitan Magistrates, following the procedure set out in Sections 262 to 265 of the Criminal Procedure Code (Cr.P.C.). It directed that the trial should be conducted expeditiously, preferably concluding within six months from the date of filing the complaint. Adjournments should be minimized and only granted with written reasons.

2. Evidence on Affidavit:

Under Section 145 of the Negotiable Instruments Act, the complainant may give evidence by way of affidavit, which can be read in evidence during trial. The Court clarified that the complainant need not be examined twice—once at the time of filing the complaint and again after summoning the accused—unless the Magistrate specifically orders otherwise. The Court also permitted the Magistrate to allow the accused to give evidence on affidavit subject to justifiable grounds.

3. Issuance and Service of Summons:

Magistrates must scrutinize complaints on the day they are presented and, if documents are in order, take cognizance and issue summons immediately. Summons should be correctly addressed and served both by post and email, with the assistance of police or neighboring courts if necessary. If summons return unserved, prompt follow-up action is mandated.

4. Compounding of Offences:

Courts were advised to inform the accused at the first hearing that they may apply for compounding of the offence, and if such an application is made, to dispose of it at the earliest to avoid protracted litigation.

5. Conduct of Trial:

The accused must furnish a bail bond to ensure attendance throughout the trial and take notice under Section 251 Cr.P.C. to enter their defence. The examination-in-chief, cross-examination, and re-examination of the complainant should be completed within three months. Courts may accept affidavits in lieu of oral evidence to save time, but witnesses must be available for cross-examination when required.

6. Legislative Background and Object:

The Court reviewed the legislative history, including the 1988 and 2002 amendments to the Negotiable Instruments Act, highlighting Parliament’s intent to enhance the credibility of cheques and to provide a swift, effective remedy against cheque dishonour without clogging the judicial system.

7. Judicial Precedents:

The judgment referred to authoritative Supreme Court decisions emphasizing that cheques must not be used as tools of fraud or delay and that the statutory presumption of offence under Section 138 places the onus on the drawer to prove otherwise.

The Court concluded by directing all criminal courts across India to strictly adhere to these procedures and guidelines, ensuring that cheque dishonour cases are disposed of promptly in line with the statutory mandate and the constitutional right to a speedy trial under Article 21.

This judgment is expected to significantly impact the banking and commercial sectors by restoring trust in negotiable instruments and facilitating faster recovery of public funds locked in litigation. It also provides a clear procedural roadmap for courts to minimize delays and enhance the efficacy of justice delivery in cheque bounce cases.

Statutory provisions

Negotiable Instruments Act, 1881 - Sections 138, 139, 141, 143, 145; Criminal Procedure Code, 1973 - Sections 251, 260, 261, 262, 263, 264, 265

Indian Bank Association v. Union of India (SC) : Law Finder Doc Id # 544257