DECRIMINALIZING DISHONOUR OF CHEQUE

BY DHWAJA SHRIVASTAVA AND AADARSH MITTAL

INTRODUCTION

Section 6 of the Negotiable instrument act, 1881, defines cheque as- “A “cheque” is a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand and it includes the electronic image of a truncated cheque and a cheque in the electronic form.”

E-cheque is the electronic print of the same cheque, signed using the digital signature and asymmetric cryptosystem. In India this facility is now replaced by CTS- Cheque Truncation System 2020.

MEANING OF DISHONOUR OF CHEQUE

A cheque is claimed to be honoured if the banks give the quantity to the payee. While, if the bank refuses to pay the quantity to the payee, the cheque is claimed to be dishonoured.

Section 138 of Negotiable instruments act 1881 talks about dishonour of cheque due to insufficiency.

It is also necessary that the cheque should be returned by the bank unpaid.

Dishonour maybe because of 2 reasons:

• -Either the amount of money present in the account is insufficient
• -Or the amount to be paid has exceeded the amount to be paid from that account as in the agreement made with that bank.

It has been generally held in various cases that dishonour because of the insufficiency of funds has got to be interpreted liberally. Dishonour because of the remarks like “Account closed”, “Refer to the drawer” or “Stop payment” of the cheque could also be deemed to be covered by the availability contained in Section 138 of the Act.

WHY DECRIMINILISATION IS NEEDED?

The spread of novel coronavirus has adversely affected the global economy. The pandemic has a tearing effect on the Indian economy too. To alleviate the effect ministry of finance announced on June 8, 2020 to decriminalise minor offences like dishonour of cheque under section 138 of negotiable instrument act, 1881. Section 138 of the Act casts criminal liability punishable with imprisonment which may extend to 2 years or with fine which may extend to twice the amount of the cheque or both. The ministry of finance backed the step with reasons like it will reduce the pendency of cases in courts and will decrease the burden of business implying ease in doing business.

The ministry of finance understanding the complications of the step also arranged for stakeholder consultation exercise.

SUPREME COURT’S STAND

Decriminalisation of dishonour of cheque can also be traced in various judicial pronouncements. In Makwana Mangaldas Tulsidas v. State of Gujarat & Ors, Hon’ble supreme court proposed decriminalisation of dishonour of cheques of small amounts. In Kaushalya Devi Massand v. Roopkishore Khore, Hon’ble supreme court affirmed that dishonour of cheque is more of a civil wrong which has been given criminal overtones.

FIRST REACTION

The step has got mixed reactions while some are against this proposal reason being that it will increase the number of dud cheques. Some are in favour of a proposal stating that it will enhance credibility in transacting through cheques.

IS IT ENOUGH ONLY TO DECRIMINILAISE SECTION 138 OF NI ACT,1881?

No, because section 138 is not the only remedy to the claimant. A claimant can also make use of provisions of Indian penal code section 406 (criminal breach of trust) and section 420 (cheating) which defeats the intention of decriminalising dishonour of cheque.

CONCLUSION

Simply speaking, decriminalising cheque dishonour under Section 138 of negotiable instrument act, 1881 looks like an incomplete step as there are certain other provisions which provide the same remedy to the claimant. India’s payment landscape has changed radically in recent times. For large value payments, NEFT, RTGS, and IMPS are popular options while cheque constitutes only 3% of total payments. But it cannot be denied that people prefer cheques and see them as a secure means of payment. In such a situation, the opinion of the Supreme court in Makwana Mangaldas Tulsidas v. State of Gujarat & Ors to decrimi\nalise cheque dishonour of small amounts looks to be more practical.

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