RESEARCH METHODOLOGY RESEARCH PROJECT

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THE NATIONAL LAW INSTITUTE

UNIVERSITY, BHOPAL

RESEARCH METHODOLOGY
PROJECT TITLED

“PENDENCY OF CHEQUE BOUNCE CASES IN

INDIA”

Submitted by:
Submitted to:
Satendra Pratap Singh
Mr. Abhinav Gupta
(2022LLM31)
(Faculty, Research
Methodology)

FIRST SEMESTER
LL.M. (RESEARCH METHODOLOGY)

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NOVEMBER 2022

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TABLE OF CONTENTS

DECLARATION

I, Satendra Pratap Singh S/o Shri R.S. Singh, Roll Number 2022LLM31,

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Enrolment No. B- 1020 do hereby declare that the project titled “PENDENCY
OF CHEQUE BOUNCE CASES IN INDIA” is the culmination of my own
independent research, which I carried out under the guidance of my faculty for
research methodology Mr. Abhinav Gupta The bibliography and footnotes in
this project thoroughly and totally credit the literature on this topic that I
consulted for its intended use. Reasonable efforts have been taken to stay within
the bounds of acceptable plagiarism. The Turnitin report's similarity index is %.
The course instructors are free to ask me to alter the project if it does not adhere
to the plagiarism guidelines. If I don't follow the faculty's directions, my project
can be brought to the Committee Against Use of Unfair Means, and I'll have to
abide by their ruling.

DATE: 13.11.2022 SATENDRA PRATAP SINGH

PLACE: NLIU, Bhopal ROLL NO. 2022LLM2022
ENROLLMENT NO. B=1020

ACKNOWLEDGMENT

Many people have bestowed their blessings and heartfelt support on me in the
successful completion of this project, and I would want to take this opportunity
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to thank each and every one of them.

I want to start by thanking God for giving me the ability to successfully finish
this job. Then, I'd want to express my gratitude to the Corporate Laws faculty
member(s) whose invaluable advice was instrumental in helping me finish this
research. Their recommendations and directives were a crucial factor in helping
to finish the project.

I also want to express my gratitude to my parents, classmates, and seniors who

have supported me throughout this process by offering me their great advice.

LIST OF ABBREVIATIONS

Abbreviation Full Form

Art Article
SC Supreme Court
HC High Court
S Section
NIA Negotiable Instruments Act
MP Madhya Pradesh
CrPC Criminal Procedure Code
SCC Supreme Court Cases

ABSTRACT
The long-evolved concept of rule of law involves inter alia right to speedy trial and
adjudication of disputes in a time bound manner, as accepted by many countries including
India through common law. The reality on the other hand is way too far from idealism as
infringement of fundamental rights by the State is a common sight in a country like India.

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There are reports by the national and international forums which focuses the attention to the
alarming status of justice delivery system in India. The pending cases in Indian courts till 04
November 2022 is …… The Law commission of India through its various reports have
cautioned the governments at centre as well as states pertaining to its negative effects on the
economy but due to lack of political will and inefficiency in the justice administration
system, the concern becomes gargantuan/ unresolved. Slow judicial process has adverse
consequences not only to the litigating parties but also on the structure and efficiency of
markets and the standard of living of the citizens. The present paper would discuss the
pendency of cases filed under Section 138 of the Negotiable Instruments Act, 1881 (“NIA”)
also known as Cheque Bounce cases.

However, the situation is still not gloomy because even if the number of complaints filed
each year is steadily rising, they are not being resolved at a rate that is equal to that growth.
In a case under Section 138 that had been on hold for nearly 16 years, the Supreme Court's
Division Bench expressed regret and instructed the Registry to record a Suo Motu Writ
Petition (Criminal) with the title "Expeditious Trial of Cases under Section 138 of N.I. Act
1881. Senior SC attorney Mr. Siddharth Luthra was appointed as amicus curiae and provided
a report that particularly shocked the court's conscience about the amount of criminal cases
still outstanding as of December 31, 2019, totalling 2.31 crores.

KEYWORDS: CHEQUE BOUNCE CASE, SECTION 138, PENDENCY OF CASES

INTRODUCTION
The cheque bounce case under Section 138 NIA is filed by the complainant when the cheque
given by the defaulter does not clear the process due to insufficiency of funds. Chapter XVII
– Dishonour of Cheques was added in NIA containing sections from 138-142 and were made
punishable with imprisonment for a term of one year or with fine which may extend to twice

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the amount of the cheque as per Section 138. It came into force on 01.04.1989. The situation
of long pending cases could not be controlled hence an amendment was brought in the 2002.
The amendment added Sections 143-147 which allowed the courts to try the cases under NIA
summarily, notwithstanding anything contained in CrPC, 1973 and other attempts were made
to make it easy for the Complainants like production of Bank’s slip or memo was considered
to be prima facie evidence of the fact of dishonour of cheque. The offense under Section 138
was also made compoundable so as to enable the parties to settle the dispute amicably and
swiftly.

LITERATURE REVIEW
1. Devendra Damle & ors. in their paper ‘Characterising cheque dishonour cases in
India: Causes for delays and policy implications’1. The authors have tried to
figure out the key case characteristics linked to the procedural delay that can be
directly targeted by court interventions. In the other half of the paper there is a
discussion on effectiveness of the 2015 amendments by comparing the duration of
cases handled before and after the procedural reforms were implemented. Finally,
section 7 concludes the paper and presents the way forward.

2. Shalini Dalat and Beena Diwan in their paper ‘Cause of pendency of cases in
India: An analysis’2 has deliberated on the issue of pendency and has made
attempts to remedy the same, a number of recommendations have been made,
including the appointment of extra judges, improvements in the distribution of
business, and modifications to the regulations and the elimination of delay
strategies. Several Law Commissions and other organisations have looked at this
issue, which has started to worry even legal specialists, but there don't seem to be
any remedies.

3. Jyoti Rattan and Vijay Rattan in their article ‘The COVID-19 Crisis - the New
Challenges Before the Indian Justice and Court Administration System’ 3 have
highlighted the need to have major infrastructural changes in judiciary during and

1
Devendra Damle & ors, ‘Characterising cheque dishonour cases in India: Causes for delays and policy
implications’ (2022).
2
Shalini Dalat and Beena Diwan, ‘Cause of pendency of cases in India: An analysis’ 6(2) IJHS.
3
Jyoti Rattan and Vijay Rattan, ‘The COVID-19 Crisis - the New Challenges Before the Indian Justice and
Court Administration System’ (2021) 12(2) IJCA.

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post Covid era. Issues like e-filing, e-summons, virtual hearings have been given
paramount importance to facilitate convenient litigation.

4. Rajnish Jindal and Amit Raj Agrawal in their research paper DELAYS AND
PENDENCY OF COURT’S CASES IN INDIA – AN ANALYSIS 4 made an
attempt to investigate the underlying reasons behind delays in India's justice
delivery system. Along with prominent academics' opinions, the report also
includes the Law Commission of India's suggestions.

STATEMENT OF PROBLEM

The humongous pendency of complaints under Section 138 NIA (Cheque Bounce case) is a
serious burden on the shoulders of the Indian courts.

HYPOTHESIS

The amendments in current legal framework i.e., both substantive law as well as
procedural law should see a sharp decline in the pendency of cheque bounce cases in
India.

RESEARCH OBJECTIVE
1. To understand the reasons behind the huge pendency in cheque bounce cases in
India.
2. To understand the stand taken by the appropriate authorities to tackle the issue.
3. To analyse the recent judicial developments pertaining to the issue at hand.

RESEARCH QUESTIONS

1. What is the volume of pending cheque bounce cases in India?

2. What are the issues or the reasons for such huge pendency?
3. What are the ways to overcome those issues?
4. What are the suggestions to be provided by the author to reduce the burden on
courts pertaining to Section 138 NIA?
4
Rajnish Jindal and Amit Raj Agrawal, DELAYS AND PENDENCY OF COURT’S CASES IN INDIA – AN
ANALYSIS (2021) 18(8) PJAEE.

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RESEARCH METHODOLOGY

This research is purely doctrinal in nature. Secondary sources like research papers, journal
articles, website materials and reports, etc. are the major resources that the researcher has
referred to complete this research. The OSCOLA method of citations has been used in this
research.

CHAPTER 1: SERVICE OF SUMMONS

The NIA was brought in to frame the laws pertaining to promissory notes, bills of exchange,
and cheques. The govt. in order to popularise the practise of usage of cheques and enhance
the credibility of the instrument, amended the Act in 1988.5 A new chapter (§§ 138 to 142)
was incorporated for penalties in the event of dishonour of cheques due to insufficient funds
in the account of the drawer of the cheque. However, it aimed to include adequate safeguards
to prevent harassment of honest drawers. § 138 provided for the circumstances under a
drawer can be penalised for the dishonour of a cheque.

5
Banking Public Financial Institutions and Negotiable Instruments Laws (Amendment) Act. 1988.

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A new chapter (§§ 138 to 142) had been added on penalties when a check is dishonoured due
to insufficient funds in the check issuer's account. However, it was intended to include
appropriate safeguards to prevent harassment of honest subscribers. Section 138 checks
cannot be cashed under punishable circumstances.

By 2001, however, these provisions did not seem to have had the desired effect. Although the
punishment was considered insufficient, the courts decided that a number of cases were
pending in the country. As a result, cases could not be resolved in a timely manner. Due to
the heavy burden on the Court, a working group was formed that same year to review Section
138 of the NIA and recommend necessary changes. effectively accomplishes the purposes of
Section 9. Among other fixes included:

A) To increase the penalty from one year to two years.

B) Court discretion to waive one-month notice period.
C) Rules of Procedure for Waiver of Appellant's Preliminary Evidence.
D) Provides procedures for service of subpoenas by express mail or seized private
courier.
E) Provisions for Summary Judicial Procedures. And
F) allow crime compounding.

Eventually, in March 2020, a Suo -motu case pertaining to the "expeditious trial of instances
under Section 138 of the NIA, 1881" was accepted by the Supreme Court of India. As
previously indicated, the court selected Amici Curiae to assist in the case, and in October of
the same year, they presented their initial paper to the court. The Amici provided a number of
suggestions to speed up the trial, including, among others:

a) Address jurisdictional issues;

b) Address multiplicity of proceedings;
c) Expedite service of summons to reduce absconsion;
d) Explore setting up specialised courts;
e) Increase the use of pre- and post-summons mediation;

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f) Mandate presenting of a plausible defence before conversion from summary
to summons trial; and
g) Summon witnesses only when the accused presents a defence.6

CHAPTER II: ABSENCE OF ACCUSED DEFAULTER IN COURT HEARINGS

As per the data presented through empirical survey in one paper 7 that a non-appearance by
the accused ordinarily stretches the course of the case approximately by 213 days. In
addition, the absence of the accused often results in an additional 7 sessions being needed to
conclude the case. Both of these results are in line with our expectations. Therefore, any
steps taken by courts to secure the accused's presence will aid in reducing the length of time
cases take to resolve and the quantity of hearings required. The suggested interventions
include issuing the summons by email, instant messaging, and the automatic notice-service
software of the Supreme Court. Traditionally, the court issues a summons to the accused if
they consistently fail to appear before the court. If the defendant still does not show up, the
court based on Section 70 of the Code of Criminal Procedure issues a non-bailable warrant
(CrPC). This allows the accused to be taken into custody at anytime and anywhere by the
police. Police officers additionally given the power to forcefully enter or breach the home's
walls and doors or the place where the accused is hiding. If the defendant does not show up
for court even after the arrest warrant is issued without posting bail, the judge may declare
the defendant to be a "criminal accused" under CrPC sections 82 and 83.

Typically, the court will issue a warrant with a bailable amount if the accused frequently fails
to show up for court. According to Section 70 of the Code of Criminal Procedure, the court
issues a non-bailable warrant if the accused still fails to appear (CrPC). This gives the police
the authority to detain the suspect anywhere and at any time. The police are also given the
power to forcefully open or destroy the walls and doors of the suspect's residence or hiding
location. Under sections 82 and 83 of the CrPC, the judge may designate the accused as a
"criminal accused" if they continue to miss court appearances even after arrest warrants have
been issued without bail. It can then give permission.

6
Amici Curiae, In Re: Expeditious Trial of Cases under section 138 of the NI Act 1881 2020.
7
Devendra Damle & ors. “Characterising cheque dishonour cases in India: Causes for delays and policy
implications” (2022)

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CHAPTER III: Conversion of summary trial to summons trial under

special circumstances only

According to Section 143 of the Act, all offences under Chapter XVII of the Act shall be
tried in accordance with Sections 262 to 265 of the Code.

The second proviso allows the Magistrate to switch the matter from a summary trial to a
summons trial if he believes that, after hearing all the evidence, a sentence of imprisonment
more than a year may be necessary.

The majority of cases should be tried summarily, according to the Supreme Court and Amici
Curiae. By doing this, courts can drastically shorten the time spent on matters involving
cheque dishonour. The Supreme Court's suggested mechanism calls on courts to avoid
converting cases to summons trials unless the accused has a strong defence. In addition, the
court must put its justifications for holding a summons trial in writing. Unless an audit
mechanism is put in place to evaluate how frequently and why cases are converted to
summons trials, as well as whether doing so was required, this recommendation may not be
of much benefit on its own. Additionally, institutionalising a system for ongoing court effect
evaluations will be necessary. The Amici Curiae had brought attention of the Court to the
mechanical conversion of summary trials to summons trials that occurs frequently. The High
Courts have accepted the recommendations he made in his preliminary note that the High
Court’s issue practise instructions to the Trial Courts for documenting compelling and
sufficient grounds before converting a summary trial to a summons trial.

The Act's Section 143 was introduced in the year 2002 as a preliminary help for prompt
resolution of complaints submitted under the Act's Section 138. At this time, it's essential to
cite the Code's Chapter XXI, which addresses summary trials. In a situation where the
accused is not present during a summary trial, if the accused enter a guilty plea, the
magistrate only needs to note the render a ruling that includes a finding on the merits of the
evidence a succinct explanation of his conclusions. There is a provision that states sentence
of imprisonment more than three months cannot be sentenced using the summary trial
procedure. Nevertheless, despite anything else in the Code, Sections 262 to 265 of the Code

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were deemed applicable "as far as may be" for the trial of an offence under Chapter XVII of
the Act. The complaint will only be treated as a summons trial if the Magistrate believes it
may be necessary to sentence the accused to a period longer than one year.

The Apex Court's first rule states that "there shall not be any mechanical conversion of
summary trial to summons trial." The trial court may try cases summarily in accordance with
sections 262 to 265 of the CrPC. under Section 143 of the N.I. Act, and if the matter is
handled summarily, the trial court may impose a sentence of imprisonment not to exceed one
year. The case will be heard as a summons trial if the Magistrate believes it may be necessary
to impose a sentence that lasts longer than a year. According to the observations made by the
Honourable Supreme Court, "it is obvious from the responses of various High Courts that the
Trial Courts are converting complaints under Section 138 from summary trial to summons
trial automatically without recording reasons. The outcome of such conversion has slowed
down the resolution of the cases. Additionally, Section 143's second proviso requires the
Magistrate to record an order outlining the justifications for the conversion. After
documenting the reasons for changing the complaint trial from summary trial to summons
trial, the Magistrate may employ the power granted to him or her by the second proviso of
Section 143. The Magistrates must give justification before changing a complaint's trial
under Section 138 from a summary trial to a summons trial, according to practise directives
issued by the High Courts.

The majority of cases should be tried summarily, according to the Supreme Court and Amici
Curiae. By doing this, courts can drastically shorten the time spent on matters involving
cheque dishonour. The Supreme Court's suggested mechanism calls on courts to avoid
converting cases to summons trials unless the accused has a strong defence. In addition, the
court must put its justifications for holding a summons trial in writing. Unless an audit
mechanism is put in place to evaluate how frequently and why cases are converted to
summons trials, as well as whether doing so was required, this recommendation may not be
of much benefit on its own. Additionally, institutionalising a system for ongoing court effect
evaluations will be necessary.

INQUIRY UNDER SECTION 202 OF THE CODE IN RELATION TO SECTION 145

OF THE ACT

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The second rule is that "when the accused resides outside the trial court's territorial
jurisdiction, an inquiry shall be made pursuant to Section 202 of the Criminal Procedure
Code and shall record reasons before issuing summonses." In cases when the offender resides
outside of the court's territorial jurisdiction, the Magistrate is required by section 202 of the
Criminal Procedure Code to inquire before serving the appropriate paperwork.

The Hon'ble Supreme Court has stated that in view of the judgments of this Court in Vijay
Dhanuka & Ors. v. Najima Mamtaj & Ors.8, Abhijit Pawar v. Hemant Madhukar Nimbalkar
and Anr.9, and Birla Corporation Limited v. Adventz Investments 10 regarding the applicability
of Section 202 of the CrPC to complaints filed under Section 138 of the NIA. It has been
ruled in various cases that the Magistrate does not always need to delay the issuance of
process just because the accused is residing beyond the court's jurisdiction. Furthermore, if
the necessary satisfaction can be attained from the evidence on file, it has also been decided
that failure to conduct an investigation as required by Section 202.

CHAPTER 4: JURISDICTIONAL ISSUES AND MULTIPLICITY OF

PROCEEDINGS

A check dishonour case involves four territorial areas at first glance: I the issuer's primary
residence; (ii) the payee's primary residence; (iii) the location of the check's issuance; and
(iv) the location of the check's presentation.

The NI Act only outlined conditions under which complaints about cheque dishonour could
be made prior to 2015. The territorial jurisdiction of the courts where such a complaint had to
be lodged was not specified. As a result, some people filed lawsuits in places that the
opposing party could not easily access. As a result, matters would need to be moved to

8
Vijay Dhanuka & Ors. v. Najima Mamtaj & Ors 2014 SCC 638.
9
Abhijit Pawar v. Hemant Madhukar Nimbalkar and Anr (2017) 3 SCC 528.
10
Birla Corporation Limited v. Adventz Investments (2019) 16 SCC 610.

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appropriate courts for hearing. The Act was modified in 2015 to state that complaints may
only be filed in the court that has jurisdiction over the payee's bank branch. 11 This removed
the ambiguity over where complaints had to be submitted in court, but proceedings still
frequently started in territorial jurisdictions where the accused did not normally dwell. 12
Delays could result from jurisdictional concerns that require the transfer of cases from one
court to another.

According to Section 219 of the Code of Criminal Procedure (CrPC), up to three of the same
offences can be charged against a person in a single trial if they were all allegedly committed
within a 12-month period. Similar to this, under section 220, a person who commits multiple
offences in a single transaction may be charged with each offence and tried separately. A
single financial transaction may result in the dishonour of several checks, according to
experience. However, only

three offenses—and thus the dishonour of only three checks—can be tried jointly under the
CrPC. As a result, there have been numerous lawsuits involving the same issuer (accused) or
the same transaction.

Furthermore, multiple proceedings often add an additional 10 hearings to the total number of
hearings needed to conclude a matter. Both of these results are in line with our expectations.

This might be because the judiciary was obliged to coordinate too much. The Supreme
Court-appointed Amici Curiae in In Re: Expeditious Trial of Cases under Section 138 of the
NI Act 1881 made the following recommendations to solve this issue:

In order to curb the proliferation of proceedings where checks have been issued for a single
purpose, the Union Government introduces a legislative reform. But several complaints,
summonses, and trials must be conducted.

In order to ensure that complaints arising out of the same transaction but leading to the
dishonour of multiple checks be clubbed together and a common process developed for joint

11
Negotiable Instruments (Amendment) Act 2015.
12
Amici Curiae, In Re: Expeditious Trial of Cases under section 138 of the NI Act 1881 2020.

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trial, the Supreme Court issued directives to High Courts to amend their Criminal Rules of
Practice (by whatever name called).

CONCLUSION

The Supreme Court and Amici Curiae have made the following suggestions to
shorten the length of time that cheque-dishonour cases remain pending:

1. Increase the use of pre- and post-summons mediation.

2. Hasten summons service to lower absconsion.

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3. Require a convincing defence before switching from a summary to a
summons trial.

4. Call witnesses only after the defendant offers a defence.

5. High Courts should develop plans to resolve matters that have been
outstanding for 2-4, 4-6, or 6+ years.

6. Take into account the number of proceedings

7. The magistrate must note the factors that led to the summary trial's

8. Consider establishing specialty courts.

9. Legally resolve the interpretation of Section 202 CrPC

10. Issues of jurisdiction

The author draws the conclusion that the majority of the objectives of the Amici
Curiae and Supreme Court suggestions do have an impact on the length of NI
Act cases. Therefore, any actions that can lessen the percentage of cases that are
turned into summons trials, stop cases from being filed in the wrong
jurisdiction, ensure the presence of the accused, and reduce the multiplicity of
proceedings will lessen the amount of time that these cases take to resolve and
the number of hearings that are necessary. However, we discover that instances
sent to mediation take a lot longer to resolve. We found that sending more NI
Act matters to mediation could lengthen the process and put an even greater
pressure on the courts. Additionally, the fact that there aren't many cases
suggests that there are problems with the mediation process.

In addition, the author claims that although contentious matters demand more
hearings, they are resolved in less days. This suggests that courts may be more
effective at settling these disputes than mediation settings. Consequently,

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expanding the number of special NI Act courts may have the desired result of
raising disposition rates and decreasing pendency.

The Hon'ble Supreme Court has also asked the High Courts, including the
Supreme Court, to determine which cases are still outstanding under Section
138 of the N.I. Act and to refer those cases to mediation as soon as possible.
This is an innovative idea in criminal law and a very positive development. To
explore various suggestions offered for stopping the explosion of the judicial
docket, the Hon. Supreme Court established a Committee with Hon. Mr. Justice
R.C. Chavan, a former judge of the Bombay High Court, as its chairman. The
Committee has been given additional matters pertaining to the swift resolution
of complaints under Section 138 of the Act by the Apex Court to consider.

BIBLIOGRAPHY

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